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Last Updated: Monday, 11 July, 2005, 07:24 GMT 08:24 UK
MG Rover 'white knight' drops out
MG TF sports car
Rescue rumours still circle Rover
Businessman David James has ended plans to rescue collapsed carmaker MG Rover.

Speculation has been rife recently about a possible rescue for Rover, which went bankrupt earlier this year at a cost of more than 5,500 jobs.

Mr James is part of a consortium that had hoped to buy Rover and keep making cars at the firm's Longbridge plant.

For that to happen, Mr James needed China's Shanghai Automotive (SAIC) to agree to buy key Rover businesses and assets, which it refused to do.

Without SAIC's agreement, Mr James and his group could not raise the money that they needed to buy Rover.

'Logical step'

Under the terms of their rescue plan, Mr James wanted to break up Rover and create a new MG car firm. The MG brand is seen as one of Rover's most valuable assets.

Poster pleading for the jobs at Longbridge to be saved
The MG Rover collapse sparked the loss of 5,500 jobs

Under his plan, SAIC would have acquired Rover's profitable Powertrain engine-making division, and undertaken to buy the firm's remaining assets a year later.

Mr James said that over the weekend it became clear that SAIC was not willing to commit to the plan.

"I thought they would accept it, because it would be such a logical step," he told the BBC's Today programme.

"We would have put them on our board and given them 25% of our new MG company as a gift," he explained.

"It would have been a very logical progression towards an eventual time when SAIC would have owned everything."

He said that it would have given SAIC access to the UK car market as well as providing the Chinese firm with the assets they already had expressed an interest in.

More talks

SAIC had already held lengthy discussions with Rover's management about the possibility of a partnership, but eventually ruled itself out of making a bid.

Analysts said that the firm may have decided it can get the assets cheaper once all hopes of a rescue have evaporated.

Speculation has swirled about Rover and its chances of finding a white knight.

The Mail on Sunday carried news of Mr James' talks, while The Sunday Telegraph reported that another firm, Nanjing Automobile, had been awarded preferred bidder status, enabling it to conduct negotiations on an exclusive basis.

Rovers' administrators PricewaterhouseCoopers have set an October deadline for reaching a deal.

Mr James said that his deal could only be resurrected if PwC made it clear it would not accept bids from SAIC or Nanjing for parts of MG Rover, or if the UK government promised to step in as a guarantor for Mr James's proposed deals.

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