student, recent events serve as a sobering reminder of how far the mighty can fall: MG Rover's vehicles used to be the centerpiece of British Leyland, which was at one time the world's third-largest carmaker.

British Leyland also provides a startling example of modern brand management practice; at various times it owned a number of today's most valuable car brands (among them Land Rover, Jaguar, and Mini) all of which have been carefully re-crafted by new owners and have successfully undergone a number of product changes beyond the wildest dreams of their founders. Meanwhile other ex-British Leyland marks (most notably Triumph, Wolsey and Austin, which have also all changed hands in recent years) sit cryogenically frozen in time, waiting for a far-off day when market dynamics or management whim dictates that they should be re-energized.

In its most recent form, MG Rover was established in 2000 when BMW Group broke up its UK car manufacturing businesses (acquired a number of years earlier from aeronautics company BAE Systems). Of the various operations and brands it owned at the time, BMW retained Mini (which was subsequently relaunched) and sold Land Rover to Ford Motor Company. The leftover operations geared around the MG and Rover brands became MG Rover.

BMW also retained the Triumph and Riley names (according to rumor, some top-secret Triumph model plans were also kept). Although the Land Rover, Austin and MG names went with their corresponding production lines, the Rover name was retained and licensed back to MG Rover. This was a condition of the sale of Land Rover to Ford to ensure that a re-invigorated MG Rover could be prevented, if absolutely necessary, from confusing the market with a 4x4 Rover.

That left MG Rover with two marks; clearly the most iconic of these was MG. Although much damage had been done to the brand by integrating it into Rover (During the 80s, MG had been simply used to badge higher spec Rovers), for many customers the name would always be associated with MG's racing heritage. More recently, products like the MG-F had re-established pride in the MG name, and gone some way to restoring the brand to its former glory.

Rover also had a confused sense of self. Caught between the mass-market and luxury segments it struggled for relevance and appeared to lack a clear sense of direction. But, under BMW ownership, Rover had turned out some good quality products—the most notable of these being the Rover 75, with its gentrified styling and Jaguar-like design cues.

When MG Rover appointed administrators in April 2005, it publicly linked its collapse to its failure to finalize a deal (some kind of partnership or sale) to Shanghai Automotive Industry Corporation (SAIC), a company with whom it had been in negotiations for some time. But in fact SAIC had already acquired plenty of MG Rover assets before declaring it was no longer interested in the business.

SAIC currently makes cars to foreign designs and under foreign brands through joint ventures with General Motors and Volkswagen. But SAIC's purchase of MG Rover suggests it has new ambitions for both home and international markets.

A recent article in The Economist reported that SAIC paid £67M (US$ 123M) to MG Rover during 2004 in exchange for intellectual property rights; including designs and the rights to use the MG brand in certain circumstances (yet to be clarified). Some manufacturing equipment has also changed hands. Although the administrators of MG Rover are still trying to clarify what exactly MG Rover management had sold to SAIC, it is widely acknowledged that the Chinese company intends on building Rover and MG cars in China. According to BBC News, SAIC has been approaching MG Rover's UK component suppliers to investigate sourcing specialist parts for shipment to its factories.

So why would SAIC want a UK factory? The simple answer is that it wouldn't. With the intellectual property thus acquired, it seems clear that the manufacturing plant at Longbridge (home of Rovers, MGs and other British Leyland brands over the years) is more-or-less valueless on the international market. Longbridge is uncompetitive against modern factory standards, and a manufacturing line that can't share production with multiple brands and products flies in the face of modern volume car making. A Chinese manufacturing plant offers the added benefit of avoiding expensive UK labor—critical for economic domestic sales in China but also valuable if the vehicles were to be exported back to Europe.

Arguably the MG brand and the widely-liked designs for cars like the Rover 75 are some of the most valuable assets on the MG Rover balance sheet. Moreover, with no MG Rover to license the Rover brand to, it is hard to imagine the Rover brand becoming available too. And from BMW's point of view, the Chinese company could provide the perfect non-competitive licensee.

The intangible asset value in MG Rover is two-fold. Firstly, the designs, certificates, permits of the company mean that a new owner can quickly begin producing modern compliant cars for international markets, circumventing the time and resources required to develop new cars from scratch.

Second, the brands of MG and Rover (providing BMW is willing to re-license the latter) have international presence, with the former retaining a degree of prestige and both offering considerable brand name equity. If SAIC does unveil a new MG or Rover in the next few years, it is virtually guaranteed heaps of free ink worldwide. If senior design development personnel could be persuaded to follow the brand names to the new owner, and to continue working on models that are in development, then so much the better.

Although the tangible assets of MG Rover (the production line) are worth very little, we know from the SAIC deal that the intangible assets of the company were worth at least £67M. Add to that a further fee (to BMW) for the rights to use the Rover name, and we begin to gain some understanding of the true valuation. Furthermore, although other brand-related assets (design modifications, etc.) are likely to be almost commercially worthless on the open market, these could still offer considerable incremental value to SAIC which could acquire them for a very reasonable price once the company has closed.

When BMW announced it wanted rid of MG and Rover in 2000, a number of offers were put forward. One of these proposed restructuring the business as a specialist premium carmaker, primarily around the MG brand. This was rejected as politically unacceptable due to the necessary downsizing involved, and the result was an alternative deal that aimed to retain both brands, and the full manufacturing plant.

The outcome has been an uncomfortable amalgam of valuable intangible assets and less valuable tangible ones—something that has arguably damaged the overall business and sold a false promise to those working on its production line. It is only by unpicking the intellectual property, reputation and any remaining goodwill from the physical manufacturing assets that a new owner will be able to create commercial value.

Ironically, it may be the Chinese deal that ultimately saves MG and Rover, since, freed of the British Leyland millstone, they might finally be able to fly. If both can re-enter the market with a cost-effective high-quality product that successfully captures the accessible prestige of MG and Rover, then both brands just might be reborn.

Chris Grannell is a marketing consultant.