John Millett, the new director of finance and strategy at Rover, is a man with quite a job on his hands. As he talked to Accountancy Age on his first official day in the new post, he reflected on mammoth tasks ahead.
A business plan with clear aims needs preparing, a finance department that once served a group function needs restructuring, while at the same time the carmaker’s raison d’etre has been radically altered.
And all this after the Rover veteran, now taking on the biggest job of his career so far, had decided to look elsewhere for work when Alchemy Partners looked as if it would beat Phoenix in the battle to buy Rover.
‘You obviously have to explore all the options that are open to you and indeed I have been doing just that.’ He adds: ‘I would not have expected to have been working for Alchemy.’
Millett, who was already FD for the UK region for Rover and Land Rover, had clearly made up his mind. But within three hours of Phoenix sealing the deal to acquire Rover from BMW, he was already preparing to sign up for his new role.
After 24 years at Rover in various finance positions, including at one stage group finance controller while John Towers, leader of the Phoenix group, was chief executive, Millett now has the top job steering the finance team and developing strategy.
While many an FD may look on with horror at the thought of putting together a plan that will rescue the ailing Midlands car giant – Millett sees the job as ‘exciting and tremendously challenging’ – he is also clear about the way ahead.
Measures to turn Rover around will have to be ‘radical’. ‘There’s no point trying to plan a replication of another big automobile operation,’ he insists.
When the new FD talks it becomes obvious there is already a clear understanding of many of the things that have to be done, and many of the mistakes made in the past – things that should not be repeated.
The much vaunted Phoenix business plan is the new man’s ‘template’.
‘Stabilise the business,’ he says. ‘Look at something that gets us through to the end of 2000 – cash management. Establish the worldwide organisation and manage the business through stability.
‘The first real year of the business plan will be 2001. That’s when we’ll be looking to have the right sales volumes in place, and we’ll be saying let’s operate and deliver.
‘At the same time during the next 18 months we will be making moderate investments, refreshing our current range of products and then it will be the responsibility of this board, and Phoenix, to go out and seek the collaboration of a joint venture, so that somewhere down the line we’ve got some new products that we can see coming along.’
‘Sensible sales volumes’ will be key to the Millett plan as he believes a ‘mistake’ was made in the past. New figures will be ‘realist but tasky’ and on the basis of those he believes the business can be sized appropriately – although he is careful to make it understood that the figure will be what he calls ‘low case’. High volume is not a phrase in his vocabulary right now.
Peter Beale, one of the Phoenix investors, has talked about ‘turning back the clock’ at Rover and Millett fills in the details by identifying control of costs as a major aim.
He says Rover used to be able to account for every penny it spent.
‘It’s true to say that when BMW took over more lavish solutions were used than had been the case with Rover in the past.’ And he questions whether that was ‘appropriate’ for the markets in which Rover Cars operated and indicates the same expenditure is unlikely to crop up again.
Millett believes in a ‘strong finance function’ which does not act as an impediment to business. It is important that his finance staff are not viewed as ‘stopping things’ but ensuring people ‘make sensible business decisions’.
Millett says: ‘I think it’s going to be even more vital here in Rover because we don’t have any great room for manoeuvre or margin of error.’
It is obvious that the past weighs heavily on Rover. Many of the BMW innovations are having to be removed. The ‘lavish’ spending will be cut and even in the finance office decisions under BMW will have to be reversed.
The creation of a group accounting function will need sorting out to create units for Rover, Land Rover and BMW Services. This will be one of Millett’s first restructuring roles but he also plans changes to the way the finance function relates to the board.
‘We will strip out all the unnecessary levels of sophisticated reporting and analysis. Do they actually mean anything? Do they get read?’ He adds: ‘I don’t intend to burden the management with weighty reports and forecasts.’
One of the key accounting issues for any FD at Rover is the accounting standards. Rover was dogged by the spectre of two sets of accounts – one according to UK standards and the others, German.
The German set showed the company producing significantly more losses than the UK set. Millett says the real problems were how the different results the two systems produced were handled and perceived by the public and press.
The differences, says Millett, did not influence operational decisions.
‘I don’t have any great anger about the way the results were reported.
But I think it would be fair to say that BMW would recognise, with hindsight, that its PR machine, in terms of how it handled Rover, has been sadly ineffective,’ says Millett.
He’s cautiously confident about the future. He says he would not have taken the job if he was not. And he does not want to dwell on the past, though it is apparent he has strong views. But these seem to have their origins in a desire not to repeat the same mistakes.
If things do go wrong Millett can be assured they will receive maximum public scrutiny.
Rover accounting standards www.accountancyage.com/business/600806.
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