Now BMW wants to pull out of UK entirely

BMW wants to end all its car manufacturing in Britain because it would be cheaper than selling off its UK plants piecemeal, sources involved in the sale negotiations claimed last night

The result could be outright closure for its entire British operation, with the direct loss of a total of 18,000 jobs, one of the largest ever single blows suffered by British manufacturing industry. Up to a further 50,000 component jobs are dependent on Rover production.

Sources close to Alchemy, the group that backed out of buying Rover on Friday, indicate that the German car giant has changed tactics and is now seeking a buyer for all its UK holdings. The firm estimates that the cost of closing its entire UK operations is up to £1bn cheaper than it first thought, said the sources.

The Phoenix consortium, led by John Towers and regarded as the only remotely viable hope of salvation for the Rover plants, will start formal negotiations with BMW on Tuesday. BMW yesterday repeated its warning that it would close Rover, including the huge Longbridge factory in Birmingham, unless a deal can be achieved in the next month.

It is understood that Mr Towers is keen to take on both Longbridge and the Cowley plant. But the bid, albeit possibly the last hope to save the 9,000 threatened Longbridge jobs, has not yet met with unbridled enthusiasm. Alchemy boss Jon Moulton maintained yesterday that the Phoenix bid was a "non-starter" and predicted that Longbridge would close. He also insisted there was little or no chance of Alchemy restarting negotiations.

Union sources said that in order to succeed, Phoenix had to "get their act together", suggesting the only hope for a deal might be to get a major investor like Virgin tycoon Richard Branson or even ex-Paymaster General and former Jaguar boss Geoffrey Robinson involved.

Government sources believe BMW could be ready to embark on talks for a total sell-off with Phoenix or another consortium, indicating there were a great many "wheels within wheels" turning behind the scenes.

Another option is to back any bid with Government money. But such a move could cost up to £700m, according to union estimates, and is thought unlikely. The Government did offer BMW aid amounting to £129m, an offer heavily tied to substantial investment by the company itself.

Some government assistance is still on the table for the right deal. Whitehall sources said last night: "We would look at any application from any consortium and the size of aid would very much depend on what they were offering in return. It absolutely depends on the case put to us."

Trade and Industry Secretary Stephen Byers is under increasing pressure to back the Phoenix bid.

BMW board member and current Rover Group chairman, Professor Werner Samann said talks would commence on Tuesday. The firm is losing £2m a day at Rover and wants new buyers to take over the troubled car group as soon as possibly - certainly within the next 30 days.

A statement from Mr Byers said yesterday: "It's not the role of Government to run the commercial negotiations between the interested parties. Whilst recognising that ultimately the final decision will be a commercial one to be taken by BMW, there is a role for the Government in bringing parties together and in leaving no stone unturned in trying to achieve a successful outcome for the workers at Longbridge and the people of the West Midlands."

Though BMW has made a public commitment to continuing production in Cowley, Oxford and to securing the sale of the Longbridge plant in the Midlands, trade unionists now do not rule out total sale or total closure.

"You cannot rule anything out," a trade union source said. "We have not had a straight answer from them at all on anything, so it is difficult to accept anything they say." Trade union leaders plan meet BMW on Tuesday.

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said: "We need to look BMW in the eye and ask the straightforward question: 'Are you serious about selling Longbridge or is your endgame closure?' It is time for BMW to act constructively and with integrity."