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Last Updated: Monday, 4 April, 2005, 09:02 GMT 10:02 UK
MG Rover denies insolvency claims
Longbridge
About 6,000 are employed at Rover in Longbridge, Birmingham
MG Rover has denied reports that it could run out of cash as soon as Friday, as it tries to clinch a last-ditch deal to secure its future.

The Independent said Rover would be forced to call in the receivers by then unless it receives an emergency 100m bridging loan from the government.

Rover employs 6,000 staff at its Longbridge plant in the West Midlands.

Government officials are in China for talks with Shanghai Automotive Industry Corp on a 1bn investment in MG Rover.

The Financial Times said discussions had so far proved inconclusive.

'Only hope'

Over the weekend, the UK government said it was ready to offer MG Rover a bridging loan - widely reported to be worth 100m - to keep it afloat long enough to clinch investment from China.

Clearly the discussions going on in Shanghai are very important and we will wait for the outcome
MG Rover spokesman

UK Trade Secretary Patricia Hewitt has said that talks between Birmingham-based MG Rover and China's biggest car maker were the "only hope" for the UK firm.

However, Shanghai executives are reported to be concerned about the Rover's viability amid reports of its worsening financial situation.

The Independent said Britain's last volume car maker - which employs 6,000 staff at its Longbridge plant - was on the brink of insolvency.

The Financial Times reported that the company would run out of money within the next month.

Rover said it would not comment specifically on its own financial position but it denied that receivers would be appointed on Friday if the bridging loan was not secured.

"Clearly the discussions going on in Shanghai are very important and we will wait for the outcome," said a Rover spokesman.

'Pension hole'

Meanwhile, Rover has denied a report it has a 400m hole in its pension fund that is jeopardising the deal.

Clearly there is a cash flow problem here
Garel Rees, Cardiff Business School

A spokesman for the company said the figure was "completely misleading".

The firm had acknowledged a pensions shortfall of 67m in its 2003 accounts published last October, it said.

The Observer newspaper reported on Sunday that an outline deal with SAIC had been ready for weeks but had not been signed because the Chinese firm feared MG Rover could soon go bust, leaving it to shoulder pensions liabilities. It put the shortfall at 400m.

The paper quoted an adviser to SAIC as saying a new loan "may give everyone more time to negotiate the deal" but "if, as seems likely, Rover is close to insolvency, it does not mean the deal will be done."

Aerial view of Longbridge
About 6,000 are employed at Rover in Longbridge, Birmingham

SAIC representatives in London could not be reached for comment.

Industry experts said a deal was still a possibility but warned that time was fast running out.

"Clearly there is a cash flow problem here," Garel Rees, director of the Centre for Automotive Research at Cardiff Business School, told the BBC.

"[MG Rover] has not got a great deal of funds over the next six months and I think that is the issue for the Chinese. They want to make sure the company does have funds for the immediate future."

Election pressures

"We want to see this deal succeed," Ms Hewitt told BBC WM radio on Sunday, adding it "really is the only hope for Rover and thousands of skilled workers in the West Midlands".

The Financial Times said the loan had been approved by Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown, though Department of Trade and Industry officials insisted it had not yet been formally agreed.

MG Rover employs about 6,000 workers at its Longbridge plant in Birmingham, and dozens of West Midlands engineering firms depend, at least partly, on supplying MG Rover, Britain's last surviving mass car maker.

Birmingham could be an important battleground in the forthcoming general election as it has several marginal seats.

Under the proposed deal, the Chinese firm would inject cash into MG Rover to help it develop new models; in return it would secure rights to Rover's more advanced technology.




SEE ALSO:
China deal 'only hope for Rover'
03 Apr 05 |  Business
Government loan could help Rover
02 Apr 05 |  West Midlands
Rover closer to deal with China
30 Mar 05 |  Business
Rover deal 'may cost 2,000 jobs'
25 Feb 05 |  Business


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