Talks fail, breakup looms for Rover

Administrators for MG Rover Group have said the Shanghai Automotive Industry Corp has decided not to renew talks about a joint venture and ruled out the prospect of selling Britain's last major car manufacturer to another buyer.

    A Chinese firm ended talks on buying the firm

    PricewaterhouseCoopers LLP, which was appointed to oversee the company's future after it closed its British factory and filed for a form of bankruptcy a week ago, could now break up MG Rover and sell off the parts to repay its many creditors.

    PwC said SAIC's decision would result in significant layoffs.

    "We have received a copy of a letter from SAIC early this morning which communicates to the DTI (the government's Department of Trade and Industry) that they are not willing to acquire either the whole or part of the business on a going concern basis," said Ian Powell, joint administrator at PwC.

    Talks fail

    Rover's downfall was precipitated by the failure of talks with China's state-owned SAIC, and renewing the negotiations had been seen as the best chance of saving the company - and the jobs of about 6000 workers at its Longbridge factory in central England.

    Rover is losing more than 20
    million pounds sterling a week

    PwC, which revealed last week that Rover is losing 20 million pounds to 25 million pounds sterling ($38 million to $47 million) each month, said that in addition to exploring the potential of a deal with SAIC, PwC had looked into "a number of other inquiries".

    "In our view, none of these is capable in resulting in a sale of the complete business," said joint administrator Tony Lomas.

    Rover had hoped the deal with SAIC would generate cash to allow it to introduce new models and stem the falling sales of its current makes. The company, which turned out 40% of the cars bought in Britain in the 1960s, has not produced a new model since 1998 and now holds only a 3% share of the market.

    Redundancies

    The British government, which has been heavily involved in discussions about the crisis - coming just weeks ahead of a general election - provided a 6.5 million pound emergency loan on Sunday to pay Longbridge workers for a week.

    Powell said that after SAIC's letter, "we have concluded that there is no realistic prospect of obtaining sufficient further finance to retain the work force while the position with other parties is explored".

    "In the end I'm afraid it has been bad news today"

    Tony Blair
    British prime minister

    "As we indicated earlier in the week, significant redundancies will now be effected," he added.

    Prime Minister Tony Blair cancelled his afternoon election campaigning commitments to travel to central England, where he will unveil an aid package for the Rover workers.

    Speaking to an MG Rover worker who called a BBC radio show, Blair said: "I'm really sorry. I just want you to know we tried every single thing we possibly could to put the deal together with the Chinese company.

    "In the end, I'm afraid it has been bad news today."

    Worst fears

    Tony Woodley, general secretary of the Transport and General Workers' Union, said the worst fears of the MG Rover workers and about 18,000 other employees at firms that supply the carmaker had been realised.

    "The one in a million chance we felt our people had has now been taken away. We have worked hard this week with the administrators to develop a sound business plan to present to Shanghai Automotive Industry Corporation," he said.

    "But it does take two to talk and that opportunity has now gone."

    Woodley said the union would hold urgent talks with PwC to discuss the future of the workers.

    Fat cats?

    The directors of Phoenix Venture Holdings, Rover's parent company, have been criticised for paying themselves significant salaries and pensions as the company was falling into the red.

    The four directors of Phoenix Venture Holdings bought Rover from BMW for a token 10 pounds in 2000, after BMW suffered losses of about $6 billion in six years. Unions are unhappy about a 13 million pound trust fund they set up that mainly benefits directors. 

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    Double standards: 'Why aren't we all with Somalia?'

    Double standards: 'Why aren't we all with Somalia?'

    More than 300 people died in Somalia but some are asking why there was less news coverage and sympathy on social media.

    The life and death of Salman Rushdie, gentleman author

    The life and death of Salman Rushdie, gentleman author

    The man we call 'Salman Rushdie' today is not the brilliant author of the Satanic Verses, but a Picassoesque imposter.

    The Beirut Spy: Shula Cohen

    The Beirut Spy: Shula Cohen

    The story of Shula Cohen, aka The Pearl, who spied for the Israelis in Lebanon for 14 years.