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MG Rover and Shanghai Automotive Industry Corp (SAIC), China's largest carmaker, remained committed to a proposed alliance, the British company said, playing down fears that partnership talks crucial to its survival were near collapse.
An outcome to negotiations that could make or break the proposed joint venture with SAIC and directly impact 6,000 British jobs is expected by the end of the week.
John Towers, head of the private holding company that bought MG Rover for 10 pounds four years ago, said “very extensive personal commitments” were being made to secure a deal.
“I want to underline the continued commitment from ourselves and from SAIC for a successful outcome to our joint venture,” said Tower, who is at the talks in Shanghai, in a statement.
An MG Rover spokesman refused to say whether any progress had been made in the latest talks Wednesday.
SAIC has fears about its exposure to a potential 400 million pound (US$750.7 million) pension black hole and other possible liabilities at MG Rover if the company collapses.
Talks to salvage the joint venture are expected to resume Wednesday as sources close to both sides said a final decision to go ahead or drop the deal was expected by Friday.
Under the proposal, SAIC would own 70 percent and MG Rover 30 percent of the joint venture, U.K. newspapers have reported. The venture would produce one million cars a year in both China and England, with the aim of rejuvenating the Rover model range and sales and giving SAIC a foothold in Europe.
MG Rover, a former British icon dating back to 1905, was sold to Germany’s BMW AG in the 1990s before returning to British hands when it was sold to Tower’s Phoenix Venture Holdings four years ago.
The Chinese company is threatening to walk away from a deal unless Tower and MG Rover’s other British owners can provide additional guarantees about its financial security.
The U.K. Department of Trade and Industry is considering offering a 100 million pound bridging loan to help MG Rover secure a deal.
MG Rover directly employs 6,000 staff at its plant in central England and the U.K. Government, which earlier Tuesday called a May general election, fears thousands more jobs at local suppliers are also under threat.
The collapse of MG Rover would be another blow to Britain’s fading glory as a carmaking center. Ford, which owns luxury brand Jaguar, cut jobs and scaled back production in England last year.
Sources said earlier Tuesday the joint venture proposal, under negotiation since last year, was looking rocky.
“The longer it drags on, the more you can’t help but think these issues are actually insurmountable. It is expected that the current crisis will come to a head this week,” one industry source said.
As well as pension deficits, MG Rover also has a 500 million pound loan outstanding to BMW, although the loan is not due until 2049 unless MG Rover turns profitable, a BMW spokesman said.
Jon Moulton, managing partner at venture capital firm Alchemy Partners LLP, which pulled out of talks to buy MG Rover four years ago, was pessimistic.
“I would not buy it for a pound. I can’t understand why the Chinese are interested. It is just a loss-making business with substantial liabilities,” Moulton said.
Pension deficits are increasingly becoming an issue in merger and acquisition talks, recently contributing toward failed takeover bids for British retailers WH Smith and Marks & Spencer.
(Shenzhen Daily April 7, 2005)
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