Black Day for Black Cab firm
Just a few months ago the Spice Girls were dancing on top of their cabs in front of a global audience at the Olympics closing ceremony
But today Black cab maker Manganese Bronze announced that it has failed in its attempts to secure a rescue package from its Joint venture (JV) partner Geely and has called in the administrators. The announcement from the Coventry-based firm in a statement to the London Stock Exchange.
After announcing the suspension of black cab production in the wake of a steering defect and recall of 400 cabs last week, the firm was pinning hopes on a £15m rescue package from its Chinese JV partner Geely. But after talks last week failed to find a deal, administration was inevitable.
That recall had anyway came hot on the heels of disappointing results, with losses widening last year to £4.7m after a major accounting cock-up linked to a new IT system, and a slump in orders for its iconic black can in the key London market.
Manganese had said recently that overseas sales last year (up by 6.3% to 504 cabs) failed to compensate for a drop in UK sales (down by 23% to just 577 cabs) and that the firm was unlikely to return to profit in the final quarter of 2012 (it has been losing money since 2008). Manganese had previously said that it would be back in profit this year.
As I blogged a few weeks ago, it was all a bit worrying for a firm with just £2.8 million in the bank. Manganese owes Geely around £19m for components and vehicles.
Operating margins last year were squeezed by supply chain issues (importing components all the way from China can't help) as well as increased warranty costs. The firm's shares had dropped by 75% since April, from a peak of around 40p in April to 9p in October, before being suspended last week after the recall and suspension of production.
As well as its home-made spectacular own goals, Manganese has of late blamed the weak UK economy, global economic uncertainty, and a delay in meeting an order for 1,000 taxis from Azerbaijan for poor results.
But as I've said before, there's more to it than that.
While the reputation of Manganese's iconic black cabs has improved in recent years, the sad fact remains that the TX4 cab is an old, heavy design and new entrants like Eco City (which uses a Mercedes-Benz Vito platform) have been steadily taking market share.
That's not surprising as big firms like Mercedes can take one of their mass produced vans and work with niche players like Eco to convert it to a taxi, thus keeping costs down. And with Nissan about to enter the market, things were anyway about the get even tougher for Manganese. The firm had effectively been over-taken by new technology, production methods and the economics of the industry.
Manganese said today that after the failure to secure funding "the board has therefore concluded that the group is no longer a going concern and has filed notice of intention to appoint administrators." It also said that a quick resolution of the product recall announced on October 12 remained the top priority for the group in administration.
Manganese stated that "the board remains hopeful that the fundamental strengths of the company, the TX4 model and its global reputation will provide the platform for a successful business in the future."
But whether or not a viable business model can actually be carved out for Manganese under new ownership is now the key question. The tie-up with Geely through the JV is anyway critical for the firm and complicates ownership in the short-run by another party.
Whether Geely will pick up the firm on-the-cheap out of administration is an interesting question. If it does, there is of course the risk of another lift-and-shift of what remains of assembly (think MG Rover and LDV) out to China, although some assembly in the UK may be useful for branding purposes.
Ultimately, if it's to survive, the brand needs a big backer able to take a mass produced platform and convert it to taxi. That may or may not be Geely.
Professor David Bailey works at Coventry University Business School