Rover was rescued from collapse yesterday as the Phoenix consortium bought the troubled car-maker from BMW of Germany for just £10, safeguarding up to 50,000 jobs in the West Midlands.
But Phoenix, led by the former Rover chief executive John Towers, immediately cautioned that the long-term future of the business crucially depended on it finding a collaborative partner among the world's big motor manufacturers.
The deal, signed at 8.30am yesterday after a long night of negotiations, was welcomed by ministers, trade union leaders and local politicians in the West Midlands.
But the news was tempered by confirmation that Ford is to announce the end of car assembly at its Dagenham plant in Essex later this week with the loss of 3,000 jobs directly and thousands more among component suppliers.
Phoenix will make approaches in the next three months to a number of big carmakers - with Honda of Japan and Germany's Volkswagen heading the list. One Phoenix member said that an alliance with a major car-maker would be "a very, very important aspect of our long-term future".
Mr Towers was greeted as the conquering hero and the saviour of the British motor industry as he arrived at Rover's Longbridge plant.
The deal will safeguard all but 1,000 of the 9,000 jobs at Longbridge and maintain volume car production at the plant with output this year of just over 200,000 vehicles. Mr Towers forecast that Rover, which lost £770m last year, would be cash positive in 14 months and profitable within two years. The Rover workforce will own one-third of the company through a trust being set up by Phoenix. Mr Towers and three other members of the Phoenix consortium have put money into the deal and will own stakes.
BMW, which had threatened to close Longbridge by the end of this month unless a buyer was found, is understood to have provided £500m of working capital and has sold Rover debt-free.
The consortium will continue to manufacture the Rover 25 and 45, MGF and Mini at Longbridge and shift production of the Rover 75 from Cowley in Oxfordshire to the Birmingham plant and start production of an estate version soon. Phoenix has been given an option to buy the Longbridge engine and transmission plant and the body pressings plant at Swindon, Wiltshire. But BMW will retain ultimate control of the Rover brand, licencing it to Phoenix, and has kept the Triumph and Riley marques but given Wolseley to the consortium.
An emotional Mr Towers said yesterday that the deal was "hugely more beneficial" for Rover, its employees and suppliers than the rival offer from the venture capital group Alchemy. But he cautioned: "We have a huge amount of work to do to put this business back in balance."
Phoenix has scrapped plans developed under BMW's ownership to manufacture a new medium-sized car, the R30, at Longbridge because of the £1.7bn cost and said it had no intention of applying for subsidies from the Government.
Mr Towers refused to be drawn on the funding Phoenix had available for new models. But Nick Stephenson, a leading member of the consortium, said it was "significantly more" than the £60m-£80m Alchemy had planned to invest.
John Edmonds, general secretary of the GMB general workers union, said: "This is the best deal that we could have hoped for and gives the company a breathing space. It is an opportunity to rebuild the Rover brand and John Towers can be assured of the strongest support from the workforce."
The Retail Motor Industry Federation, which represents 300 Rover dealerships, congratulated Phoenix and welcomed the end of months of "confusion and indecision".
The rescue was a personal boost for Stephen Byers, Secretary of State for Trade and Industry, who had been under months of sustained attack for his handling of the crisis. It also came as a relief for Tony Blair in the wake of last week's local elections, which were the worst results since Labour took office.
Mr Byers was praised by Downing Street and warmly applauded by Labour MPs as he told the Commons that there could be fewer than 1,000 redundancies at Rover.
But the job losses at Dagenham which are expected to be announced by Ford tomorrow could take some shine off the Rover announcement. Mr Byers was also careful to emphasise that difficulties could still lie ahead. Senior Labour sources said BMW would be legally responsible for all the redundancy costs, if the Phoenix rescue collapsed within two years.Reuse content