Cloud over sports car maker TVR as Russian playboy owner closes factory

The future of Britain's largest remaining independent sports car maker was shrouded in doubt last night after management of TVR shocked union officials by announcing that its Blackpool factory is to close in six months with the loss of 260 jobs.

Management and unions had been in talks throughout the afternoon but at the end of the day it was still unclear what was meant by an abrupt statement from the company that TVR would keep a presence in the UK but would be relocating production.

Only in December TVR, bought two years ago for £15m by a fresh-faced Russian playboy Nikolai Smolensky, said it had located a five-acre site in Blackpool and would create a completely new facility. But last week half of the 260 employees were abruptly told to stay at home rather than return from the Easter break after a steep decline in production from a run rate of 450 cars a year to just 100.

Last night, a spokesman for TVR said: "Production will definitely continue in the UK, but we're looking at offers from a number of sites and there is the possibility sub-assemblies coming in from overseas." It is understood that Wales is one of the alternative production sites.

Commenting on TVR's reassurance that the company itself was not closing, a spokesman for the Transport and General Workers' Union said: "We do not know whether that means that there will be production in the UK on another site or that it will move abroad. They just did not spell it out. We expect another meeting later in the week."

It was never terribly promising when the world's youngest rouble billionaire became the custodian of the Britain's last independent car company based in the world headquarters of ballroom dancing.

Yet for the past two years TVR sports cars have continued to emerge from the row of ancient, single-storey workshops, reviewers have continued to applaud the new product, dealers have detected the promised quality improvements and all has seemed to be well.

When the 23-year-old Mr Smolensky bought the company in 2004 after a due diligence period that lasted all of two weeks, management technique was several shades different. The young Russian's first act was to arrange lunch for all the then 400 employees because he thought the catering facilities inadequate.

Yesterday Andy Robertson, the Transport and General Workers' Union's regional organiser for the North-west, described the closure announcement as a "devastating blow that has left the workforce stunned", adding that he had never seen a workforce treated so disgracefully.

And yet it has happened before under Mr Smolensky's predecessor. Peter Wheeler, the much-admired and deeply eccentric founding father of the modern TVR, had to have a substantial redundancy programme among the 650-strong workforce when the growing firm hit a period of falling demand in the late 1990s.

Today, TVR has hit three snags at once. New European emission regulations (the so-called Euro IV) have not yet been met. It is understood that engineering and approvals are several months behind time and European dealers are being starved of cars.

Meanwhile, the car market is weakening in most of the developed markets and the UK has been hit by the unseasonally cold weather and slow start to spring.

TVR's emergence as Britain's biggest independent car company has come as a result of other iconic brands such as Aston Martin and Lotus falling under the ownership of large foreign car manufacturers. The company was founded in 1943 by Trevor Wilkinson, whose first name is the brand's origin.

Peter Wheeler - a successful industrialist, chemical engineer and Yorkshireman - bought TVR 25 years ago and built up his new sports car company with single-minded enthusiasm. While other companies relied on alliances or engine providers, Wheeler took the risk of dropping the highly regarded Rover 3500 V8 engine and designed his own engine range. The inevitable early quality problems have been overcome to generate the AJP power unit that creates fearsome performance. The latest TVR Sagaris has a tubular steel chassis, lightweight composite body and weighs just under a tonne. The four-litre, six-cylinder, 400bhp sports car will accelerate to 60mph in 3.8 seconds - and all for just £54,000.

TVR's natural capacity is about 1,000 cars a year, although it has been as high as 1,750 in 1997. Last year it was nearer 700 but this year sales in the first quarter initially indicated the company would sell only 450 cars for the full 12 months. Part of that decline was said to arise from the commitment to quality that Smolensky promised when he took over in July 2004.

And yet there was natural suspicion of the Russian's commitment. Not only is he young and without experience in the motor industry but he also has the distraction of managing another dozen companies. On a recent visit to the factory floor, he found craftsmen preparing a dashboard for dispatch to a company in Paris that would fulfil an order for a crust of diamonds. Mr Smolensky vetoed the deal - because he had his own diamond company that would provide the necessary artful decoration.

Business partners seeking to quash rumours of TVR's imminent demise point to the fact that the company has just committed £120,000 to a ritzy stand at the July London Motor Show. There are also commitments to new models, new prestige dealerships and a new factory in Blackpool for which the land has already been secured.

That move would have broken the final link with Peter Wheeler, who sold out for a rumoured £15m but retained the land and buildings and collects the rent. Though he said at the time of the sale that he would remain involved in styling, engineering and consultancy, he is now rarely seen at the factory and devotes himself to earning his Yachtmaster ticket, racing his new Aston Martin and shooting.

The next week will show whether the Russians have totally lost confidence in their investment or whether there is a plan to recover from what they regard as a temporary sales blip.