Production of the new Mini could be switched to the Cowley plant in Oxford and as many as 7,500 jobs threatened across the group unless cost savings can be achieved.
Confirming that talks with the Government had started, Bernd Pischetsrieder, chairman of the German car maker, also said a sweeping review of Rover's cost structure was under way.
"Options under investigation include further job cuts, the reduction of employment costs and increased working flexibility," he said on the opening day of the British International Motor Show in Birmingham. "Short- term actions are required for the long-term future for Rover Group."
Rover's management is understood to be pressing unions for a 20 per cent cut in the labour bill - running at pounds 800m a year - allied to an overhaul of working practices across the board.
A cut of one-fifth in Rover's employment costs would be equivalent to 7,500 job losses among the 38,000-strong workforce. The Longbridge plant, which employs 18,000, is in the most direct firing line.
Walter Hasselkus, chairman of Rover, said it wanted to retain production at Longbridge but that it needed to have financially viable products. "If we don't find those products there will be no plant. It is as simple as that."
The renewed fears over the future of the plant, which produces the 200 and 400 series and the Mini, overshadowed the launch of the executive Rover 75 - the first all-British saloon produced by the company since the late 1970s. Rover has invested pounds 400m at its Cowley plant in Oxford to produce the new model and hopes to sell at least 100,000 a year - double the sales of the 600-800 series which the R75 replaces.
While the future of Rover is reviewed, all non-essential spending has been suspended for the remainder of the year. A decision on further job cuts in addition to the 1,500 redundancies Rover implemented in July is expected in the next fortnight.
BMW bought Rover for pounds 800m in 1994 with a pledge to invest pounds 3bn and turn it into profit by 2000, but the strength of the pound and poor productivity mean break-even will not be achieved without radical action.
BMW is aiming to replace Rover's "New Deal" agreement guaranteeing jobs for life with flexible working arrangements modelled on the agreement struck with unions at its new pounds 400m engine plant at Hams Hall in Warwickshire. This allows much greater flexibility in manning, pay and shift patterns. There is no overtime pay, instead employees "bank" any extra hours worked and redeem them later.
Rover is also shifting 25 per cent of its pounds 4bn component spend overseas in a bid to save pounds 200m-pounds 300m a year. UK suppliers account for 85-90 per cent of the components on Rover cars but, starting with the R75, this will fall to 75 per cent and possibly lower.
Peugeot lifted the jobs gloom descending on the West Midlands by indicating that it might create 800 jobs by introducing another shift and weekend working at its Ryton plant in Coventry.Reuse content