Rover's Chinese deal threatens thousands of Longbridge jobs

MG Rover has told the Government its pounds 1bn proposed takeover by the Chinese could lead to thousands of job losses in the West Midlands.

The warning was made in private meetings with ministers from the Department of Trade and Industry (DTI) earlier this year - but the news raises questions over claims that the deal with Shanghai Automotive Industry Corporation (SAIC) would "save" Longbridge.

MG Rover employs around 6,500 people in the West Midlands, and ministers are desperate to prevent Britain's last mass car producer collapsing before a general election.

The Government is now discussing with MG Rover and SAIC ways of limiting the redundancies in what is Labour's voter heartland, according to a well- placed Whitehall source.

It emerged last week that the DTI had discussed allowing MG Rover to defer millions of pounds in VAT payments as a way of ensuring that SAIC goes ahead with the takeover. But the revelation that it will lead to a depleted Longbridge workforce also raises questions about the use of taxpayers' money to sweeten the deal.

MG Rover executives have yet to discuss possible redundancies with trade unions. Dave Osborne, the national officer at the Transport & General Workers' Union, said: "Management have made a commitment to meet with the unions when the negotiations are complete."

The Whitehall source said MG Rover had warned ministers that job losses could be in the thousands.

A DTI spokeswoman refused

to comment on job cuts at Longbridge, but said: "Ministers have met with senior executives from MG Rover, SAIC and the Chinese government and stressed support."

MG Rover also declined to comment on redundancies. A spokesman said: "We need to wait until we get the whole partnership agreement and see how it is structured."

When details of the SAIC deal first emerged in November, MG Rover executives speculated that an agreement could be reached in January. The company now refuses to say when a deal will be done.

"Behind the scenes, we are working hard on product plans and future models. We are working as if the partnershiphas been signed," said the MG Rover spokesman. Nick Stephenson, one of the businessmen known as the "Phoenix Four" who bought MG Rover from BMW, flew to China last week to continue negotiations, he pointed out.