Blair flies to Longbridge in bid to save stricken car manufacturer

Tony Blair has raised hopes that a rescue bid could be launched from the wreckage of MG Rover to save some of the 6,000 workers faced with redundancy over the collapse of the company. The Prime Minister and Gordon Brown, the Chancellor, both spoke to the Chinese government about a renewed rescue attempt.

In an unprecedented move in the middle of a general election campaign, Mr Blair flew back from the Pope's funeral in Rome for a crisis meeting with the Chancellor, and Longbridge unions in Birmingham.

"We will do whatever we can possibly do to safeguard the livelihoods and the jobs of people here," said Mr Blair. "It's not been possible to do the original joint-venture deal but that is not the end of it. We just have to roll up our sleeves and get on with keeping as much production, as many jobs, as we possibly can."

Ministers and the union leaders are seeking a second Phoenix-style venture to rescue the engine-making, gearbox and sports car manufacturing plants. But car industry insiders said it would be almost impossible to find anyone else willing to take on the undisclosed debts of MG Rover which ultimately made the Chinese walk away from the deal.

Still wearing a black tie from the papal funeral, Mr Blair said: "This is a very, very difficult time, a time of anxiety for the people who work at Longbridge and their families. We will continue to do absolutely everything we can to keep car production and as many jobs as possible at Longbridge. There may be the opportunity of doing something with the Chinese company, although not the original prospect that was there a few weeks ago." He said the Government wanted "to keep as much production and as many jobs as possible" at Longbridge.

The collapse of MG Rover and the loss of jobs is a potential body blow to Labour's campaign which is built around Britain's relative economic prosperity and high employment. Patricia Hewitt, the Secretary of State for Trade and Industry, said £40m would be provided to help the estimated 19,000 workers in the supply industry, whose refusal to deliver parts on Thursday brought the financial crisis to a head. Finding another buyer could cost the taxpayer millions more.

Mr Brown said: "We are on the side of the working people of Longbridge, throughout MG Rover people in the supply industries here in Birmingham, across the Black Country right across the Midlands. We will fight as hard as we can for manufacturing for the skilled jobs for the car industry and for jobs generally in this area."

The decision at lunchtime decision by Rover's management to call in PwC (PricewaterhouseCoopers) as administrators effectively sounded the death knell for the last high-volume British car maker. Unions called it a disaster.

Workers appeared to blame the Phoenix management team led by John Towers who bought the company for £10 from BMW five years ago, rather than the Government, after production was halted. "I think the Government has done all it could," said one worker, who was told to take home his tools from the shift on Thursday night. Workers have been told to report back for work on Monday but they will not be paid after that. They will be entitled to one week's pay for every year worked at the plant, up to a maximum of 12 years. For some that could amount to little more than £3,600.

Industry experts said a buyer might be found for the MG marque which could continue as a niche sports car maker with a reduced workforce at Longbridge of up to 2,000. Tony Woodley, the leader of the biggest union at the plant, the Transport and General Workers, led union efforts to seek a second rescue bid, which some described as "the daughter of Phoenix".

Ms Hewitt vehemently denied Tory claims that she triggered the crash by refusing to release a £100m bridging loan to Mr Towers. As the crisis deepened on Thursday evening, Ms Hewitt spoke to Mr Towers three times: at 5.45 when she was told there would be a board meeting; at 9.20 when she and Mr Woodley were told the company had decided to call in the receivers; and at 9.40 when she read him a statement she was about to make announcing the decision to call in receivers. Mr Towers approved her statement, her aides said.

"We have been working round the clock for the past 10 days to try to prevent this from happening," a source close to Ms Hewitt said. "We are trying to save something from the dying embers of the business."

The Chancellor and the Prime Minister are understood to have privately made it clear to the Chinese government that British government aid from the taxpayer could be back on the table if there was a prospect of a deal. But Ms Hewitt was unable to go ahead with the bridging loan because there was no deal to bridge, said a source.

Ian Powell, a joint administrator for PwC, said: "We have asked employees to return to work next week. We will be working closely with management, staff and unions, key suppliers, creditors and the Government as the situation develops."

Mr Blair had talks lasting 25 minutes with the Chinese government on Wednesday night. Union sources said the potential partners, Shanghai Automotive Industry Corporation, were "appalled" at the figures revealed this week by Mr Towers and his management team.

They are rumoured to show a £400m deficit in the pension scheme, and other debts which made the company's long-term financial future highly doubtful. The Chinese, who had invested £67m in intellectual property rights, decided MG Rover was insolvent. "They said the £100m bridging loan was neither here nor there," a union source said. "They felt it was too big a risk."

The crisis could not have happened at a worse time for Labour as it prepares to defend a series of marginal seats across the West Midlands. They include Birmingham Yardley, a top target seat for the Liberal Democrats; Redditch, where the Industry minister Jacqui Smith faces a strong Tory challenge; and Birmingham Hodge Hill, which was nearly captured by the Liberal Democrats in a by-election last year.