White Knight saves Black Cab?

By David Bailey on Feb 1, 13 10:27 AM in

News that the black cab maker Manganese Bronze has been bought out of administration for £11.4m by the Chinese car manufacturer Geely is welcome news and probably the best case scenario in terms of rescuing the firm and saving remaining jobs in Coventry.

Manganese Bronze went into administration in October with 99 out of its 176 black cab workers losing their jobs. Geely has now acquired the "business and the principal assets" of Manganese after the deal was agreed with administrators Pricewaterhouse Coopers.

Geely had made an initial investment (in so doing paying well over the odds) in 2006 in return for a 20% equity stake, and established a joint manufacturing facility in China. Geely declined to increase that equity stake in subsequent years but effectively kept Manganese afloat by extending the firm credit lines. Not surprisingly Geely was the biggest single creditor when Manganese went into administration, being owed over £17m.

The acquisition includes plant, equipment and property, intellectual property rights, trade marks and the "goodwill of the business." It also includes Manganese's 48% stake in the joint venture in Shanghai set up with Geely in 2009 which makes components and cabs for sale around the world other than in the UK.

The deal also includes Manganese's stock of unsold vehicles, and includes the retention of the Mann & Overton dealership in London and related dealership assets including those in Manchester and Edinburgh.

Geely mainly want Manganese because the latter is its partner for the importing of Geely cars into the UK. Indeed, on cars, the Chinese are coming; expect to see Geely cars in showrooms fairly soon. But where that leaves taxi cab production is a big question.

Ideally I'd like to see two things. Firstly, in the short term cab production restarted at Coventry with workers taken back on. Secondly, and longer term, there needs to be investment in new models to replace the TX4 so that the ongoing loss of market share to the likes of Mercedes - especially in the critical London market - can be arrested. With the imminent arrival of Nissan in the taxi market that competition is set to get even tougher.

On the first point we've had very promising noises from Geely; it has said that its priority will be to re-establish the manufacture, sale and servicing of new and current vehicles, including the continued assembly of the TX4 at the Coventry plant. That's great news.

On the second point I'd like to see a commitment to developing a new model to replace the TX4 sooner rather than later - that will need substantial investment but Geely has both resources and capabilities to do this. Critical will be a platform sharing approach whereby technologies developed in Geely and/or Volvo - which is also owned by Geely - can be shared with a taxi variant, thereby getting costs down. At the moment the TX4 is a relatively expensive ownership proposition for cabbies. That needs to change.

Another element of this could be to look at the sourcing of components. Relying on shipping components from China has meant rising costs (owing to rising transport costs) and quality issues. Some relocalisation of component sourcing might be possible to help get costs down and improve quality issues.

Local universities - both Coventry and Warwick - offer a host of capabilities in automotive design and engineering and could provide critical help if Geely was to look at bringing R&D to the region, as Shanghai have done with MG at Longbridge.

Overall, the Geely takeover does offer some hope for the future and is the best game in town for taxi production.

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David Bailey

David Bailey - Professor of Industrial Strategy at the Aston Business School, Birmingham
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