Audit report on Rover rounds on DTI

The Department of Trade and Industry will face a drubbing next week from the National Audit Office (NAO) for its handling of the collapse of the MG Rover car company and the failed bid from Shanghai Automotive Industrial Corporation (SAIC). The collapse led to the loss of about 5,000 jobs and the end of the last British-owned volume car producer.

A report into the affair, to be published next Friday, is understood to be highly critical, in carefully phrased Whitehall language, of the department's lack of competence in drawing up contingency plans for how to handle the Rover crisis.

Sir Brian Bender, permanent secretary at the DTI, will be summoned before the powerful Commons public accounts committee on March 20 to explain what happened. The report will also raise questions about the role of Patricia Hewitt, then trade and industry secretary, and ultimately the prime minister, in funding a rescue package to try to save the Longbridge plant, which closed at a sensitive time before the last general election.

In particular, it is said to question the emergency £6.5m loans to Rover's administrators, PricewaterhouseCoopers, to keep the workforce in jobs while they desperately looked for buyers.

The National Audit Office said yesterday that the report would cover in detail the run-up to the collapse of Rover, from late 2004 to April 2005 when production was halted at Longbridge. It will then examine how the DTI handled the actual crisis when the firm - owned by Phoenix Venture Holdings (PVH) and run by the so-called Phoenix Four (John Towers, Peter Beale, John Edwards and Nick Stephenson) collapsed into administration.

The report is believed to praise the work of the DTI and the Department for Work and Pensions for how they handled the "meltdown" scenario in setting up a Jobcentre immediately and creating training schemes for the 5,000 laid off.

The most serious criticism is reserved for the run-up to the crisis, when it was known that SAIC had told the ministry that it would not buy the whole group.

The NAO apparently says the DTI failed to meet modern Whitehall standards for providing risk analysis for ministers on how they should handle such a crisis.

Civil servants are criticised for concentrating only on the prospect of a meltdown and not looking at alternatives or at how part of the site might be saved or telling ministers what steps they could take. Civil servants defended themselves by blaming Ms Hewitt for not asking them to prepare risk-analysis plans but the NAO report makes it clear that Whitehall should provide for such scenarios.

Matters were made worse by a lack of communication with the Phoenix Four before the crisis. Yesterday a spokesman for PVH said the firm had been in continuous contact with the DTI and meetings had been cancelled at the request of the DTI, not the PVH directors. The DTI agrees with the report's facts but not its conclusions. A spokeswoman said yesterday: "We believe the department carried out its responsibilities properly but we cannot comment on the report."

Running down

May 2000 Phoenix 4 buy MG Rover, without the Mini, from BMW for £10

June 2004 MG Rover in talks on deal with Shanghai Automotive

April 8 2005 Administrators called in by MG Rover after talks break down

April 10 2005 Government pledges £6.5m loan to pay wages for one week

April 15 2005 Administrators PwC announce about 5,000 redundancies at the MG Rover plant at Longbridge

June 2005 PwC says £1.4bn in claims against MG Rover but assets just £85m

July 22 2005 Nanjing Automobile buys bulk of MG Rover assets

February 23 2006 Nanjing signs lease on part of Longbridge site