Rover jobs axe could fall only two weeks before election day

More than 2,000 politically sensitive manufacturing jobs could be axed at the car maker Rover just two weeks before the general election, it emerged yesterday. The redundancies would follow final agreement of the joint venture with Shanghai Automobile Industry Corporation (SAIC) of China.

According to a leaked letter, Kevin Howe, the chief executive of MG Rover, and Zhao Feng Gao, his counterpart at SAIC, have written to MG Rover dealers suggesting 2,300 jobs will go once the deal with SAIC is signed. According to The Independent on Sunday the final agreement is scheduled for 20 April, although it has been postponed several times previously.

The redundancies - out of a total workforce of 6,100 - so close to the expected election on 5 May will be acutely embarrassing for the Government, concerned as it will be to hold key marginal constituencies in the West Midlands. Last month Gordon Brown was in talks with the Chinese authorities to help seal a deal to save MG Rover.

Reductions in employment at its Longbridge plant in the West Midlands have been expected. Last year the company successfully applied to the Court of Appeal to overturn the "jobs for life" guarantee given to the workforce in the Nineties during BMW's ownership of the group.

The company continues to lose money, and sales of its ageing model range have been disappointing MG Rover built 106,000 cars last year against a break-even point of nearer to 200,000.

Whatever becomes of the deal with the Chinese, an adjustment in the company's workforce would be needed simply to bring employment levels into line with much lower levels of output.

Efforts to sell into an increasingly competitive market were not helped by speculation about the company's future and accusations that the four directors of the Phoenix consortium, who bought MG Rover from BMW for £10, have put their interests ahead of the company. Some assets, such as the property portfolio and car-leasing business, will be ring-fenced from the SAIC joint venture. Reports have said MG Rover has offered the prospect of relocation to China for some staff.

There are also worries about what the venture with China will mean for employment. Concerns focus on the prospect of more design, engineering and component manufacturing being relocated to China, with Longbridge relegated to the role of a minor assembly plant and marketing HQ.