Alchemy dangles Lotus deal, but is silent on Rover job cuts

Alchemy Partners, the British venture capital firm intent on taking over ailing Rover, last night hit back at its critics with the news that it hopes to team up with Lotus to build a new sports car and that it will re-enter the US market if its bid is successful.

The move will be viewed as an attempt by Alchemy to portray itself as a car maker of significant size, albeit a niche player. It will also be seen as a way of fending off a rival consortium, led by former Rover chief executive John Towers, which promises to save more Rover jobs.

Alchemy, headed by Jon Moulton, also said it would honour the redundancy rights of workers at Rover's Longbridge plant. Rover has been put up for sale by current owners BMW.

Alchemy said that if it acquired Rover, which would be rebranded as the MG Car Company, it would launch a new sports car in 2002. It said that it had entered into negotiations with Malaysian-owned Lotus Cars to develop the new model.

After being out of the US for 20 years, Alchemy said that MG would enter this market again to tap a "great enthusiast base".

"Urgent action to re-enter this market will follow [the] acquisition. This is a significant volume opportunity," said the venture capitalist.

It is understood that BMW had been reluctant to promote the current MG sports car produced by Rover in the US, as it would have competed against their own Z3 sports model.

Alchemy said MG would re-enter motor sport "in a significant way" and that talks were already under way to produce a new format that would allow it to compete at Le Mans.

Alchemy said Rover stock was being reduced and that sales are currently "very good". A spokesman said: "BMW has told us that more Rover 75s have been sold in the last two weeks than in any previous six-week period."

The venture capital house said MG expects to undertake contract production work, which will help employment. The spokesman said: "They still plan to make under 100,000 cars a year, which does not make it a volume car manufacturer."

Alchemy said no firm decision had been taken about the Longbridge site, and it did not specify how many Rover employees would be made redundant under its plans. It expects to "maximise the site's usage" following the acquisition.

BMW has said that it will not consider the Towers bid for Rover, submitted last week, until it has concluded its negotiations with Alchemy.