However, BMW says a decision on where and when the new Rover 200/400 models are to be built will not be made for another four to five months.

Earlier reports that BMW had decided to build a new plant for production of the 200/400 series have proven unfounded.

There has been speculation that BMW might opt to build a new plant in Britain to handle the new models, perhaps qualifying for government new-investment subsidies.

New deal

Last month's radical cost saving and workplace flexibility agreement struck with unions and supported by the workers appears to have paved the way for BMW to go ahead with new model investment plans.

Around 2,500 jobs will be cut under a voluntary redundancy programme as part of the deal.

Lagging productivity at Rover which has brought massive losses for BMW since it took over the UK carmaker five years ago saw the owner threaten to close the Longbridge plant in Birmingham.

BMW has spent about £1.1bn (DM3bn) on Rover up until 1997 including the purchase price and ensuing losses.

Bernd Pischetsrieder is rumoured to be locked in a power-struggle

The Munich-based company said the radical cost-saving and workplace flexibility agreement struck with Rover employees would lift the British carmaker's productivity, helping to make the new investment viable.

Rover, like other manufacturers, has been hurt by the strength of the pound.

Merger denied

BMW has also denied that it is in merger talks with a potential partner.

"Neither the BMW group nor its majority shareholder (the Quandt family) is in talks with anyone," said a BMW spokesman at a news conference in Munich.

"There are no plans for a merger or any sort of cooperation that goes beyond a normal technical cooperation," he added.

Rumours of tie-ups surrounding Ford, Swedish carmaker Volvo and BMW have been aired in recent weeks.