The future of MG Rover and its 6,000-strong workforce is in doubt amid expectations the car maker could soon go into administration.
Rover says Longbridge could close, but it has not given a timescale
Talks to secure its future through a joint venture with China's largest car maker Shanghai Automotive Industry Corp (SAIC) collapsed on Thursday.
Trade Secretary Patricia Hewitt later said Longbridge-based Rover had called in administrators as a result.
But Rover denied this and said it had merely asked accountants for advice.
With a month to the general election, the fate of MG Rover looks likely to become a major political issue.
A spokesman for the Department of Trade and Industry said MG Rover chairman John Towers had phoned Ms Hewitt late on Thursday and "confirmed that the board had decided to call in the receivers".
Tony Woodley, general secretary of the Transport and General Workers Union, also confirmed that he too had been told by Mr Towers that MG Rover had gone into administration.
"They [MG Rover] agreed the wording of the statement that was read out by Patricia Hewitt," Mr Woodley told the BBC.
Yet MG Rover told the BBC's business editor Jeff Randall that it was not in administration and that Ms Hewitt's statement had been premature.
The car marker said it had merely asked accountancy firm PricewaterhouseCoopers to examine its books and to advise on its position.
"It appears that Ms Hewitt has jumped the gun," said Mr Randall.
Ms Hewitt said at a press conference with Mr Woodley that MG Rover had gone into administration after talks with SAIC failed to bring about a deal.
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
Talks with SAIC end without a deal, MG Rover is on the brink
"In the end, SAIC made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal," she said.
"The requirement from SAIC was that MG Rover was demonstrated to be solvent at the point of signing a deal and for two years thereafter," said a SAIC spokesman.
"They have not been able to demonstrate that and therefore we are unable to negotiate a deal."
MG Rover had been seeking a £100m ($187m) bridging loan from the UK government, which it said was vital to secure the deal with SAIC.
Yet Ms Hewitt said it was impossible to give MG Rover the loan until the deal with SAIC had been completed.
Earlier on Thursday, MG Rover had been forced to halt all production at its Longbridge plant due to a shortage of certain parts, after a number of its suppliers refused to ship orders due to the ongoing financial uncertainty at the firm.
Many now believe it is curtains for MG Rover, and the expectation is that administrators will be appointed on Friday.
"Yet again I'm having to write an obituary for another stalwart of the British engineering and manufacturing industry," said Tony Murphy, Amicus national officer for the automotive industry.
"Longbridge and the whole of the West Midlands are becoming ghost towns."
"I am very distressed and disturbed for all the people at MG Rover and the workers there, as well as for the wider community in the Longbridge area and across the West Midlands where there's a huge supply chain which is very dependent on supplying MG Rover," said Shadow industry secretary Stephen O'Brien.
"What we need now is to provide the most effective help we can to rebuild the livelihoods of the Longbridge workers, their families, and the thousands of others who rely on Longbridge," said Caroline Spelman, Shadow Secretary of State for Local Government Affairs.
Later on Friday, the government is expected to show support for MG Rover workers by unveiling a support package.