UK 'may extend loan to MG Rover'

Workers and politicians hope that Rover still has some gas in the tank

The UK government may extend its emergency loan to MG Rover, throwing a lifeline to workers after directors pledged £49m to keep the firm running.

Administrators PwC said that the £6.5m government loan would be reviewed "at the end of the week" and more help may be available if progress is being made.

Rover needs to cover wages and running costs while it seeks a rescue deal.

MG Sports and Racing - also owned by MG Rover owner Phoenix Venture Holdings - was put into administration on Tuesday.

The company, which manufactures the MG SV high performance car and leads the MG Group's motor sports activities , employs 48 staff based at Longbridge.

PwC said it would examine how the standalone operation could be restructured and would look for a buyer for the firm.

Fighting on

The government, trade unions and Phoenix Venture Holdings, which owns Rover, have vowed to find a way of keeping the company going.

At the weekend, the government announced it was offering a £6.5m loan to Rover to prevent the firm from having to make redundancies.

On Tuesday, Prime Minister Tony Blair said: "We are investigating every single possibility, and we will do whatever we can."

The European Union, meanwhile, has said it will examine any agreement to see if it breaches state aid regulations.

We will have to look at the circumstances next week...we can't prejudge where we will be then DTI

Some 6,000 Rover workers are facing redundancy and plan to take their appeal directly to Mr Blair on Wednesday when a number of their wives will hand in a letter of protest at Downing Street.

The Department of Trade and Industry (DTI) was careful not to seem too optimistic about Rover's chances of getting further loans.

A spokeswoman for the DTI said it would "have to look at the circumstances next week in the light of any developments. We can't prejudge where we will be then".

This view was echoed by Jon Bunn, a spokesman for PwC, who said the DTI "had undertaken to review the situation at the end of the week before making any decision on future funds".

Changing landscape

On Monday, the much-maligned directors of Phoenix, the so-called "Phoenix Four", pledged £49m in assets to help keep the troubled firm going.

It is hoped that the assets will help to secure long-term funding for Rover and convince the government to keep financing the firm until a solution is found.

Are Rover's owners saviours?

News agency Reuters quoted an unidentified PwC spokeswoman as saying that the government may consider providing more aid if Rover and the administrators can "prove there's a sound business logic for them to extend the loan."

One stumbling block to continued government support are the strict European Union (EU) competition rules preventing firms from receiving state aid.

The European Commission said on Tuesday it planned to study the UK loan and was awaiting more details from the government.

"We have now received some information but it is not enough," said Commission spokesman Jonathan Todd.

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Rover's administrators PwC are hoping to find a buyer for Rover and are looking to reopen talks with Shanghai Automotive Industries Corporation of China (SAIC).

SAIC was thought to be close to agreeing a deal, but baulked at the proposal when the extent of Rover's financial problems became apparent.

According to Chinese state media on Tuesday, SAIC claimed it was not considering buying Rover, preferring instead to set up a joint venture.

Several parties have expressed interest in Rover over the past few days, but there have not been any firm offers, PwC said.

Should any deal be reachable, then it is likely to take weeks to negotiate.

PwC and the unions have estimated that Rover will need at least £13m to keep going in the interim.

The company, and its engine making subsidiary Powertrain, have been losing between £20m and £25m every month.