Shanghaied by Nanjing: Chinese snap up MG Rover in surprise deal that pips their compatriots at the post

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The Independent Online

After a three-and-a-half-month sale process - which attracted some 200 expressions of interest of varying degrees of seriousness - Mr Lomas finally announced the winning bid.

Three offers had been on the table: one from the Chinese car maker Nanjing Automobile and UK engineer Arup; another from rival company Shanghai Automotive Industry Corporation (SAIC); and a third from a British consortium called Project Kimber, led by the Millennium Dome saviour David James, which was widely seen as the outsider.

Everyone was expecting the new owners of the car company to be Chinese. But the big surprise was that the victorious Chinese hailed from the province of Nanjing and not Shanghai. The decision shocked members of Project Kimber; although they knew last week that they were probably beaten, executives believed as late as Friday afternoon that SAIC had won it.

SAIC itself was quietly confident that its bid, made with a consortium put together by a former Ford executive, Martin Leech, would beat off competition from its far smaller Chinese rival.

But there had been enough false alarms to keep everyone on their toes. With MG Rover - which went into administration in April after its original joint venture partner, SAIC, pulled out over concerns about its financial position - nothing is ever simple. And so it proved, right until the end.

Nanjing plans to produce 80,000 newly designed MG cars each year at Longbridge within five years, employing 2,000 workers at full production. It will build MG variants of the large Rover 75 car and the MG sports cars at Longbridge. MG variants of the Rover 25 and 45 - small and medium cars - will be produced in China and shipped to the Midlands for final assembly. In China, the aim is to manufacture 200,000 cars eventually, possibly using the old Austin brand name, the original motor company founded at Longbridge in 1905.

No cars will be manufactured under the Rover brand, which Nanjing says will enable it to avoid the issue of intellectual property. Before SAIC pulled out of talks with MG Rover, it bought the intellectual property rights to some of the Rover models. It is not clear whether Nanjing's proposals will get round this, but Mr Lomas said on Friday night that it was not an issue.

Nanjing had won because it had the better prepared bid, Mr Lomas said, pointing out that SAIC was, until recently, interested only in buying the Power-train engine business. Nanjing, in contrast, was only ever interested in buying all of MG Rover's assets, and tabled its own bid 10 days ago.

SAIC's bid was full of conditions because it had had less time to carry out due diligence, Mr Lomas said. Issues included the way in which assets would be transferred into the new owner's hands and how the money would be paid to PwC.

Asked why he did not give SAIC more time to carry out full due diligence, he replied: "All the groups had three and a half months to make a bid."

The T&G union, which represents around half of the 6,000 former MG Rover workers, said in a statement it was disappointed that Nanjing had won because it believed that SAIC's proposals would create more British jobs. It said it would seek urgent talks with Nanjing. The union's leader, Tony Woodley, had warned that a Nanjing bid would see the "lift and shift" of production from Britain to China.

Alan Belfield, the director of industrial consulting at Arup, could barely contain his glee at being selected. "Ours was the best bid on the table." He denied that the plan was to move all production to China after a couple of years. "It's a big goal for Nanjing to be a global supplier. We are focusing in the UK to do that, and on the things which the UK is good at, such as making niche vehicles and R&D."

Nanjing, which is controlled by a local authority, is China's oldest car maker, set up in 1947 in the Jiangsu province in the east of the country. Mainly a commercial vehicle manufacturer, it makes a fraction of the 600,000 cars that SAIC, China's biggest car maker, churned out last year. Though both are owned by the Chinese state, little love is lost between them.

The victory will be particularly sweet for Nanjing as it was set to be MG Rover's main joint-venture partner until SAIC gate-crashed the talks 18 months ago. Nanjing was brought in to SAIC's plans only as a junior partner, because the Chinese government wanted to help Nanjing achieve its aim of becoming a global car maker.

Now SAIC must eat humble pie and see if Nanjing will bring it on board as a partner. Mr Belfield was diplomatic about the possibility of teaming up, saying: "That is something for Nanjing from the Chinese end. We are happy to talk to anyone who can help us make better cars in the UK."

The bidders' battle to win over the administrators, the politicians and the public has been as high profile as the lurch of the company into administration under the old owner, Phoenix Venture Holdings, in April.

It had been impossible, at times, to see beyond the spin as all the three bidders put into gear large-scale public relations campaigns to bolster their bids and discredit their rivals.

Now it is up to Nanjing and Arup to prove that PwC was right to select them. Richard Burden, Labour MP for Birmingham Northfield, said that, despite the hopes of redundant workers, it would be wrong to assume that the new owner would "bring back" MG Rover.

MG Rover has failed. Nanjing must show that this is not another Phoenix-style false re-incarnation, and that this time, it will work.