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Last Updated: Thursday, 7 April, 2005, 18:51 GMT 19:51 UK
MG Rover rescue hangs by thread
Staff leaving MG Rover's Longbridge plant on Thursday
Rover says Longbridge could close, but it has not given a timescale
MG Rover has said it faces imminent collapse unless the UK government gives it a 100m ($187m) bridging loan.

The warning came as talks with a Chinese firm on a rescue deal appeared close to failure.

A government spokesman said the loan was available "provided there is still a deal to be done".

But MG Rover was forced to suspend production at its Longbridge plant in Birmingham after some suppliers halted deliveries.

We need just 100m to see us through the next couple of weeks
MG Rover executive Peter Beale

MG Rover bosses have been locked in talks for days with China's biggest car maker, Shanghai Automotive Industry Corp, over an investment deal to secure the UK firm's future, and 6,000 jobs at Longbridge in the West Midlands.

MG Rover says the 100m government loan is vital to secure the deal.

"If the bridging loan is not offered to us by the government, we're facing the tragic closure of Longbridge," said Peter Beale, the vice chairman of MG Rover's parent company, Phoenix Venture Holdings.

Desperate

"We need just 100m to see us through the next couple of weeks," he said.

The company's situation was "looking very, very desperate" without the loan, he said.

MG Rover risks being forced into administration if the talks with Shanghai Automotive fail.

It has said its directors are ready to provide 10m of their own money to convince the UK government of their commitment to the Chinese merger.

The Department for Trade & Industry said the loan was available, if there was still a deal to be done.

Supplies dry up

MG Rover announced a temporary halt to production on Thursday.

No staff have been sent home as a result of the move, which has stopped production of cars including the Rover 25, 45 and 75 models and MG sports cars.

Many companies in the West Midlands region supply Rover, which is the last surviving British-owned volume car maker.

Our correspondent says suppliers have said they will not resume business until the company receives the proposed government loan.

One company that has stopped supplies to Rover is automotive engineering group Wagon, which said it was owed almost 1m by the company.

"In view of MG Rover's current inability to meet its payment obligations, it has decided to suspend supplies to MG Rover with immediate effect," Wagon said in a statement.

Loan calls

UK Trade Secretary Patricia Hewitt said a bridging loan had been offered, but due to continuing "commercial discussions", there was nothing more she could say publicly at this stage.

The Conservatives' shadow trade secretary Stephen O'Brien urged Ms Hewitt to confirm "without hiding behind commercial confidentiality" that the loan was definitely being offered for drawing down now.

For the Liberal Democrats, Malcolm Bruce said public money should be given to MG Rover only if a long-term solution was found and company directors invested their own money in the deal.

Rover desperately needs the Chinese investment because of losses that totalled 77m in 2003 and a continued fall in car sales.

Ms Hewitt has said the Chinese tie-up is Rover's "only hope" for long-term survival.

Talks on the loan are continuing with the government, but sticking points have arisen over the terms of the agreement.

Shanghai Automotive wants the loan to run for at least two years - which is when the joint group could start making money, they say.

However, EU rules on state aid restrict funding to a six-month period.




BBC NEWS: VIDEO AND AUDIO
Why MG Rover has suspended production



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