Saved: Chinese bail out Rover for £1bn

MG Rover, the last remaining British-owned volume car-maker, is set to be rescued with the help of more than £1bn of Chinese cash. But the agreement with the Shanghai Automotive Industry Corporation (SAIC), which is due to be signed early next year, will mean that control of the Longbridge-based motor manufacturer will pass out of British hands.

A new joint-venture company will design, develop and produce cars. It will be 70 per cent owned by the Chinese and 30 per cent by MG Rover.

The deal comes as MG Rover's financial plight worsens. Its losses this year are expected to be more than £100m and its share of UK car sales has slumped to an all-time low of under 3 per cent. Huge damage has been done to the brand by accusations of boardroom greed and asset-stripping levelled at the four Midlands businessmen who bought it from BMW four years ago for a symbolic £10. Last week, a senior BMW executive called them the "unacceptable face of capitalism".

There will be separate British and Chinese companies to manufacture the new models in Birmingham and Shanghai but the key assets and intellectual property rights of the two car-makers will be contained in the Chinese-controlled joint venture.

The deal has yet to be approved by the Chinese government, although SAIC has already made a down payment of about £40m to MG Rover. Provided the deal comes to fruition, it will safeguard the 6,100-strong workforce at Longbridge and thousands more jobs in supply companies. The agreement envisages investment of between £1bn and £1.5bn in a series of new models and annual production of around one million cars, with about 200,000 of those to be built in the UK. Most of the investment will come from the Chinese company.

John Towers, the chairman of MG Rover's parent company Phoenix Venture Holdings, has begun briefing employees and dealers on the joint venture, telling them he expects it to be signed in January or early February. Mr Towers said: "The future of the company rests on this deal. It is absolutely critical. But we are confident we are going to bring it to the table."

He added that although the Chinese government had yet to sanction the joint venture, the benefits of the deal to both companies were so compelling that MG Rover was now certain it would go ahead.

"We reckon close to one million cars could be associated with the joint venture," said Mr Towers. "You can imagine the economies of scale and the much lower cost base which will come from that. There's a medium car, a small car, a large car and a sports car platform there as well." The first fruits of the joint venture will be a replacement for the Rover 45, which Mr Towers said would appear in the spring or summer of 2006. The other new models - including one to compete in the "super-mini" sector of the market alongside the likes of the Ford Fiesta and Vauxhall Corsa - would go into production about nine months later.

Mr Towers and the three other founding directors of Phoenix - Peter Beale, Nick Stephenson and John Edwards - have been criticised over a £16m pension trust fund set up for their benefit and a further £13m they stand to gain on top of their salaries from various other financial deals involving Rover assets.

China is one of the fastest-growing car markets in the world, with SAIC's output alone expected to increase to 3.5 million vehicles over the next five years. The government-owned car-maker is one of China's top three automotive groups with sales of £12.4bn. Last year it produced 600,000 cars.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before