Rover losses stall rescue

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The Independent Online

BMW, back in discreet negotiations with Alchemy over the sale of Rover, is understood to be demanding that the venture capitalist covers the £100m of losses run up by the car maker since the talks began.

The condition, thought to have been a key sticking point when talks between the two companies broke down a week last Thursday, is believed to have come between the two sides again. Jon Moulton, managing partner of Alchemy, is understood to be furious that he should have to stump up the cash to cover trading losses incurred by Rover in the last seven weeks. The issue is thought to have superseded the original bones of contention, which were the levels of compensation due to displaced Longbridge workers and the local dealership network.

Meanwhile, Ford will this week confirm plans to end car production at Dagenham, its largest UK plant, in a move that could cost 3,000 jobs.

It is the £2m Rover is losing every day that prompted BMW's decision to sell the company it bought six years ago from British Aerospace. However, an extensive search failed to find another manufacturer willing to acquire it and so BMW entered into exclusive talks with Alchemy.

It is understood that Mr Moulton has kept in touch with BMW despite the bust-up nine days ago which ended six weeks of intense negotiations. Insiders believe that Alchemy's bid, which could lead to the loss of most of the 9,000 workers employed at Longbridge in the West Midlands, is the best hope for Rover. Mr Moulton plans to devote Longbridge to the manufacture of the classic MG marque.

The alternative is the Phoenix bid, put together by a group of West Midlands businessmen and fronted by John Towers, a former Rover chief executive. The Phoenix consortium is spending the weekend in negotiations with BMW but the German company needs to be convinced that the bid has the required financial backing.

This is in spite of a statement from John Towers, who said: "The particular matter of financial backing for the consortium has been outlined to BMW and I am pleased to say that this has been well received."

It was reported last week that none of Britain's high street banks was willing to grant the consortium a £200m overdraft facility.

Unlike Alchemy, Phoenix is planning to maintain the mass production of Rover cars at Longbridge, securing jobs for almost all the workforce.

BMW's other option is the outright closure of Longbridge, although analysts estimate this could add an extra £1.2bn to the cost of off-loading the operation. But BMW has set aside a provision to cover the cost of closure and is keen to stem the tide of Rover's daily losses.