Rover reports £187m loss and urges UK entry into eurozone

MG Rover halved its losses last year to £187m but warned that it would not break even this year as planned because of the strength of the pound against the euro.

John Towers, the chairman of the Midlands-based car maker and the man who led the buyout from BMW two years ago, called on Tony Blair to take Britain into the single currency.

"We and, I would suggest, the rest of UK manufacturing industry continue to look forward to Her Majesty's Government taking us into the eurozone at a competitive rate," he wrote in MG Rover's 2001 report to shareholders.

Sales last year were lower than planned at 170,200 because MG Rover scrapped production of some models which would have made a loss in Europe. Kevin Howe, the group's chief executive, said sales this year would be similar while losses would be cut to "tens of millions of pounds".

The group ended the year technically insolvent with net liabilities of £76m. But this was only because it was obliged under accounting conventions to include £350m in loans from BMW as liabilities even though they do not need to be repaid until 2049. Excluding this loan, net assets were £247m.

MG Rover will receive a further £150m from BMW this year – the final part of the £500m dowry it agreed when the business was bought by Mr Towers' Phoenix Venture Holdings in May 2000.

This will further boost MG Rover's cash balance which stood at £301m at the end of 2001.

Earlier this year MG Rover forged an alliance with China Brilliance Holdings which will lead to the joint development of a new medium-sized car based on the platform of the Rover 75. The new model is due to be launched early in 2004 and will be manufactured both in the UK and in China. MG Rover and China Brilliance are also sharing component and engine sourcing.

Part of the company's Longbridge site outside Birmingham is being redeveloped in partnership with St Mowden Properties. Mr Howe said the aim of the scheme, which will involve 70 acres of surplus land, was not to make speculative profits but to regenerate the area and provide local jobs.

The loss for 2001 compares with an annualised loss of £380m for the year before that and a loss of about £780m in 1999 – the last full year under BMW's ownership.

Mr Howe said that this year MG Rover's financial performance would be helped by the fact that the group now owned Powertrain, its main engine supplier. Previously, this had remained under the ownership of BMW which charged MG Rover higher prices.