Rover 'could collapse if new car fails'

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MG Rover, the last remaining British-owned volume car maker, could collapse next year unless it successfully introduces a medium-sized model, a motor industry expert warned last night.

Professor Garel Rhys, the director of Cardiff University's Centre for Automotive Industry Research (Cair), said the new Rover 55 would be essential to the company's survival. "Everything with MG Rover is really in a holding pattern until next year,'' he said.

"What really matters is how well the new car performs. If it doesn't work then the company will subside and probably subside quite quickly.'' He added: "The car has to succeed if MG Rover is to rebuild its profitability and restore its image."

His comments came as a fresh storm raged around the four directors of the Phoenix Consortium, which rescued Rover in 2000 following claims that they could walk away with £100m if the car maker fails. A newspaper report claimed that the four directors, John Towers, Peter Beale, John Edwards and Nick Stephenson, have made £31m from MG Rover in the past four years and could net a further £70m even if the company collapses because of a series of complex transactions, which have separated ownership of the loss-making car manufacturing operations from MG Rover's profitable finance, property and engine divisions.

Kevin Howe, the chief executive of MG Rover, hit back at the latest criticisms, saying it was "total nonsense'' to claim that the business was being asset stripped by the founding directors of Phoenix. Speaking at the Geneva Motor Show, he said: "In what other country with a car manufacturer represented at a show as important as this, would you expect to read a story such as this? It is a tough market place and all this nonsense we have to deal with all the time makes it more difficult.''

The row overshadowed the unveiling of a top-of-the-range Rover V8 saloon based on the design of the Rover 75. It is the first Rover V8 for 18 years and harks back to famous models of the past including the original P5B 3.5 litre used by Harold Wilson when he was prime minister.