Once-mighty British motor giant sold for a tenner promises model facelifts and some brand-new cars

More than three years ago, BMW sold Rover for a tenner. If they left the British company struggling, they certainly did not leave it destitute, providing an alleged £500m "loan" that matures so far in the future it is effectively a gift.

Despite this comfort blanket, many predicted the rapid demise of Rover, expecting it to continue losing vast sums, enough to prevent much new model development. But here it is, about to launch two more cars and outwardly, resolutely optimistic about its future.

And not without reason, because it has had successes. It has transferred Rover 75 production from BMW's Oxford plant to Longbridge in record time, launched the 75 estate, changed its name to MG Rover, bought back its engine plant from BMW, established an Italian factory to build the brutal MG SV V8 and launched MG versions of its Rovers.

Despite accusations of cynical badge-engineering, these MGs were sufficiently hotted-up to win accolades from the press and one of them, the ZR, has become the second best-selling hatch in its class, beaten only by the Mini Cooper, which MG Rover's Longbridge plant would now be building had BMW not ditched its English patient.

MG has mounted two creditable assaults on the Le Mans 24-hour race, and enjoyed modest success in saloon car racing. And MGR has facelifted the MGF into the MG TF, to maintain its position as Britain's favourite sports car, also developed new engines, unveiled the Rover TCV concept car and forged deals with Indian, Chinese and (maybe) Polish car companies. Not bad, in three years. But it is not all good news.

Although the company has dramatically reduced its losses from the BMW days, it continues to make losses. In 2001, it was £187m, and analysts predict a loss in the region of £85m for 2002, worse than originally hoped for. Despite this, its board of directors have been criticised for paying themselves handsomely. They have also rearranged the company into business units that ensure that, should the main car-making operation go under, its profitable parts-supply operation, MG Rover's property business (Longbridge is a big site), its small Italian MG factory and its engine plant survive.

But it is their business, and never mind this is the sole surviving British volume car company. And MG Rover claims it has much the same money in the bank as it had last year (£300m) even if it remains a loss-maker and sales of its ageing range are declining. The MG hatches and saloons have done a good job of stalling the fall, as have original marketing initiatives, but reaching the alleged 190,000 to 200,000 break-even point is sliding further over the horizon.

Last year, 160,000 cars found homes and this year, that will fall to 155,000. The decline is slow, but MG Rover badly needs a new mainstream product. And some doubt this will come. The gestation of the new medium car has been beset with problems. Concerned that the car was overweight and over budget, MGR asked its suppliers to help get the project back on track over 90 days. Then the engineering company TWR, contracted to develop the car, went into receivership. Only now has most of the key design data it held been retrieved, and a year has been lost.

To tide things over to 2005, there are significant facelifts of the 25, 45 and 75 on the way, as well as their MG equivalents, these due next year. Whether that will be enough to keep the company afloat until the new car comes remains to be seen. But you cannot criticise MG Rover for not making the best of what it has got.

It has also surprised observers with the launch of the Rover Streetwise, a toughened- up Rover 25, besides the new CityRover, (built by Tata in India). But the company's attempts to tie itself to a stable car-making partner are looking somewhat forlorn. Early talk of liaisons with blue-chip car-makers has all but gone, the company repeatedly rebuffed, even by one-time partner Honda.

Rumours of a tie-up with Malaysian car company Proton (which owns Lotus) amounted to nothing, and the impressive-sounding deal it announced with China Brilliance has pretty much hit the buffers, though the company did earn £150m from it. The arrangement would have meant the Chinese part-funding the new medium car, in return for the rights to assemble it and other Rovers. But a scandal involving the chairman of the commercially tangled China Brilliance has killed the deal.

Other Chinese manufacturers are said to be interested in an alliance, but no deal has emerged, perhaps closing the door on the possibility of MG Rover gaining access to the world's fastest-growing car market. The company has also tried to acquire an unwanted former Daewoo factory in Poland, to install the Rover 45 production line, but though the Polish government has an interest in keeping the factory open, the stakeholding Polish banks reckon the plant is worth more for its scrap value. The Polish government is now trying to persuade them to back the British deal.

But MG Rover has cemented its deal with Tata, the giant Indian truck- and car-maker. The new CityRover is a Tata Indica, mildly restyled and upgraded to compete at the cheapest end of the UK market. The company has suddenly got itself a replacement for the once-popular Metro at low investment cost and low unit price. The CityRover is produced at Tata's modern factory in Poona, and allegedly affords MGR a useful profit margin.

If this deal works, there ought to be scope for extending the relationship with Tata, but the Indian conglomerate seems reticent. MG Rover claims a good relationship with the company, but the two have been talking a long time and there is no joint new vehicle development plan evident yet. Tata, a company far bigger than MG Rover, may be weighing up better offers from elsewhere. MG Rover claims it can fund major new models out of what in global terms are modest sales. But the critics say no: without a more far-reaching alliance, enabling it to significantly reduce the cost of introducing major new models, the company is doomed. Industrial logic says they are right. But if there is one thing MG Rover and its antecedents are good at, it is surviving. You cannot count it out yet.

ROVER GETS TOUGH WITH THE STREETWISE

MG Rover has sprung another of its surprises with the announcement of the new Rover Streetwise, a toughened Rover 25 aimed at youth. Noticing his younger designers were not driving Rovers, styling chief Peter Stevens asked them to create a Rover 25 they would buy, and the Streetwise is the result.

It looks like an off-roading 25, but its makers call it an urban on-roader because it does not have four-wheel drive. It does have an off-roader high driving position, thanks to the big wheels and raised suspension, and the grey protective cladding, faux skid plates, roof rails and aggressive grille lend it a dirt-basher's chunky looks. On sale in August from £9,295.

But the CityRover, above right, is more important. It is a replacement for the Metro, as a compact five-door, five-seat 1.4 litre hatch offering space and performance from £6,495. The CityRover is a reworked Tata Indica, the four-year-old Indian hatchback upgraded with better trim, a 10bhp power boost, improved brakes and suspension, and a new nose and tail. There are four models, ranging from £6,500 to £8,495, which go on sale in November.

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