Rover chief 'committed' to deal

Rover's finances are reportedly worse than previously thought

MG Rover and its would-be Chinese partner SAIC are both "committed" to sealing a deal to secure the UK car maker's future, its chairman has said.

John Towers said both sides were working for a "successful outcome" to talks on Rover's future which have been taking place in Shanghai for four days.

However, Mr Towers gave no indication of whether the two companies were any closer to reaching an agreement.

There are fears that Rover's fragile financial state could scupper the deal.

'Worrying time'

Officials from the Department of Trade and Industry and Shanghai Automotive Industry Corporation (SAIC) have been in talks about a deal with Rover's owners for the past four days.

The talks had stalled on Monday over fears about Rover's finances, which are reported to have deteriorated in recent months.

"Members of both companies have been working non-stop over the past week to create outcomes for all elements of our complex joint venture agreement," said Mr Towers.

Rover is like a spotty-faced kid-it is too big to be small and too small to be big Professor Peter Cook, Nottingham Business School What are Rover's future prospects?

He acknowledged that it was a "worrying time" for Rover staff. The company employs about 6,000 people at its Longbridge plant in the West Midlands.

The UK government has offered Rover a bridging loan - widely reported to be worth £100m - to cover its short-term financial needs until it can attract fresh investment.

However, the Chinese company is worried about Rover's finances, after a report by accountancy firm Ernst & Young claimed the company was rapidly running out of money.

Rover has been asked to provide extra guarantees about its solvency to satisfy SAIC's concerns.

Possibilities include the four members of the Phoenix consortium - which bought Rover from BMW in 2000 - putting more of their own money into the company to ensure the deal goes ahead.

Mr Towers stressed that Rover directors had provided "very extensive" personal commitments to the government regarding the deal.

Vital jobs

ROVER TIMELINE May 2000: BMW sells Rover to Phoenix Venture Holdings for a symbolic £10, saving thousands of jobs November 2001: Rover says it will spend £300m on building a new medium-sized car November 2003: Rover stops production for three days to clear a backlog of stock October 2004: Rover reports a £77m loss for 2003, down from a £95m loss in 2002 November 2004: Rover says it is in talks with China's Shanghai Automotive Industry Corporation about a £1bn joint venture February 2005: Gordon Brown discusses Rover with Chinese leaders as concerns grow the deal may be at risk April 2005: The government offers a £100m bridging loan to Rover amid fears that the Chinese deal may collapse

If SAIC walk away from a deal there is a high risk that MG Rover could be forced into administration.

In addition to the 6,000 staff Rover employs at Longbridge, dozens of West Midlands engineering firms also depend, at least partly, on supplying the firm, which is 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 the firm's more advanced technology.