MG Rover talks continue

By JAKE LLOYD-SMITH
Updated:

 

THE fate of MG Rover, the UK's last volume carmaker, hangs in the balance this week amid make or break talks in Shanghai between its would-be Chinese saviour and British Government representatives.

Officials from the Department of Trade and Industry spent the weekend negotiating with the Shanghai Automotive Industry Corp (SAIC) over conditions for saving the business, including a controversial £100m bridging loan to keep the cash-strapped group afloat.

The Chinese side is concerned about Rover's perilous financial position and its own liabilities should the Midlands business collapse in the wake of a joint-venture deal. There was, however, no official comment from SAIC officials today.

State-owned SAIC has long coveted Rover's design capabilities in a bid to transform itself from a fast-growing manufacturer of other groups' models into a fully fledged carmaker capable of designing its own lines from scratch.

Buying Rover's expertise is seen as one of the quickest ways to achieve this aim for the highly profitable SAIC, which earned a net £372m in 2003 on turnover that exceeded £5bn.

With a general election looming and thousands of jobs potentially at stake, the British Government representatives and Rover owner Phoenix have a particularly weak bargaining position.

MG Rover could be forced to call in the receivers within days, possibly by the end of this week, should it be denied the vital cash lifeline of the government's bridging loan.

The talks in Shanghai - SAIC's hometown and China's commercial capital - centre on the term over which any Government assistance-would be repayable and the extent of the Chinese long-term exposure.

The Government has already invested considerable political capital in supporting a deal with the Chinese although there remains no guarantee that SAIC will actually commit itself this week.

Prime Minister Tony Blair has led the international lobbying effort, and wrote to SAIC executives last year.

Among the ministers who reinforced the Government's plea for a deal was Chancellor Gordon Brown, who toured China in February.

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