Rover link with Proton

Rover needs investment in new models

The Rover Group is in talks with Malaysia's Proton Cars about collaboration to produce a new model.

According to the Observer newspaper, Proton has approached Rover with plans for a £1bn joint investment in a car which would be built both in Malaysia and Britain.

State-owned Proton already owns the UK luxury sports car company Lotus. It has technical links with Japan's Mitsubishi Motors.

Rover wants to reduce its workforce

Rover, which was sold by BMW to the Phoenix Consortium for just £10 about making huge losses, badly needs the new investment to meet its goal of producing 200,000 cars and returning to profitability by 2002.

Rover's new boss, John Towers, plans to cut the workforce at Rover's Longbridge plant from 8,500 to 5,300.

Last week, Rover defended its business plan against criticism from Jon Moulton of the rival venture capital firm Alchemy, which had originally planned to acquire the company.

A Rover spokesman dismissed the reports as "mere speculation."

New models

Rover plans to continue producing the Rover 25, 45, and 75 models.

But it faces delays in transferring production of its most profitable model, the executive-style 75, from Oxford to Longbridge.

And it badly needs a new medium size car to replace the ageing 25 and 45, which are based on old Honda designs before the company was acquired by BMW in 1994.

Rover has appointed Peter Stevens, the designer of the MacLaren F1 sports car, as its head of design.

It also does not face an immediate cash crisis, thanks to a generous agreement with BMW, which has provided it with £500m in interest free loans and an equal sum in unsold cars.

Rover also has a £200m loan for working capital from First Union Bank.

Suppliers worried

However, bosses in the components industry are also worried that Rover may not produce its target of 200,000 cars each year. They are worried that companies dependent on Rover, especially those who produce parts for the Rover 75, may face difficulties this autumn.

Rover's market share slumped in July to just 3.2% in the UK, as the company sold just 5,000 cars, compared to 20,000 in April, when it began massive discounting.

It will face new middle market models from Ford, Citroen, Audi and Renault this year.

The Observer a reported that the government had approached Ford, Volkswagen and Honda with a plea to takeover Rover when it first emerged that BMW was pulling out.