Chinese bailout for Rover

By GUY DRESSER
Updated:

 

MG Rover, Britain's last surviving volume car maker, is to be bailed out with more than £1bn of Chinese cash.

The rescue package means that control of the Longbridge-based manufacturer will pass out of British hands for the first time.

The new joint-venture company will be 70% owned by the Chinese following the agreement with the Shanghai Automotive Industry Corporation (SAIC).

Industry sources say that the deal with the Chinese is to be signed early in 2005 though SAIC has already made a downpayment of around £40m to Rover.

John Towers, chairman of Phoenix Venture Holdings, MG Rover's parent company, said he was confident that the deal, on which the car maker's future depended, would be signed.

Although unions are likely to be concerned about the future control of the business, there will be relief that a rescue deal has been agreed.

More than 6,000 people work at MG Rover and thousands more in the West Midlands and beyond depend on the plant for their jobs in the automotive components industry.

MG Rover has been haemorrhaging cash since it was bought out from BMW four years ago and its losses this year are expected to top £100m.

Sales, meanwhile, have slumped because of a lack of investment in new models and intense competition from other manufacturers.

SAIC, which is owned by the Chinese government, is one of the country's three-biggest car makers and last year produced some 600,000 vehicles.

MG Rover's bosses have been sharply criticised over the past few months for rewarding themselves at a time when the company's performance did not justify boardroom bonuses.

Towers, and Peter Beale, Nick Stephenson and John Edwards, the other founding partners of Phoenix, have set up a £16m pension trust fund for themselves and they have paid themselves large salaries.

Last week a senior executive at BMW, the company's previous owner, described the current directors as representing the 'unacceptable face of capitalism'.

Car industry analysts say that negative perceptions of MG Rover's bosses have deterred many Britons from buying the company's cars - and this has seen its share of the UK new car market fall to just 3%, well below the level needed to sustain a viable business.

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