BMW has final say over Rover's Chinese rescue deal

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The Independent Online

The German car maker BMW will have to vet the deal between MG Rover and Shanghai Automotive Industry Corporation which will result in effective control of the UK car maker passing into Chinese hands.

The German car maker BMW will have to vet the deal between MG Rover and Shanghai Automotive Industry Corporation which will result in effective control of the UK car maker passing into Chinese hands.

BMW still owns the rights to the MG and Rover marques and would have to approve any arrangement under which SAIC takes a majority stake in a joint venture with MG Rover and begins production of MG and Rover cars in China.

In particular, BMW will need guarantees from the Chinese that they will not use the Rover brand to move into the 4x4 market. This is because of conditions agreed in 2000 when BMW broke up the Rover group, selling the cars business to Phoenix Venture Holdings (PVH) and the Land Rover division to Ford of the US. Ford was concerned that MG Rover might go back into the off-road sector of the market in direct competition with Land Rover, using the Rover brand.

The agreement between MG Rover and SAIC, due to be signed next year, envisages up to £1.5bn of investment in four new models - a medium-sized car to replace the Rover 45, a small car replacement for the Rover 25, a new large car based on the Rover 75 platform and a new MG sports car.

MG Rover has an indefinite, royalty-free licence from BMW to manufacture under the two brand names. A spokeswoman for the German car maker said: "It is for us as owners of the trademark to ensure that future use of the marques does not go against the prerequisites put in place at the time of the sale of Rover and Land Rover in 2000. The prerequisites mainly relate to the concerns that Ford had."

She added that no talks had yet taken place with either MG Rover or SAIC about future use of the marques.

A fortnight ago BMW's most senior UK executive, Jim O'Donnell, caused offence and anger at MG Rover's Longbridge plant in Birmingham by describing the four businessmen behind PVH as the "unacceptable face of capitalism".

PVH is meanwhile poised to raise a further £15m by selling most of the remaining land at Longbridge to the property group St Modwen. The deal involves 170 acres of the 475-acre site and will leave only a small parcel in PVH's ownership. An earlier sale and leaseback deal with St Modwen raised £42.5m.

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