MG Rover intent on salvaging deal

MG Rover and China's largest carmaker remain committed to a proposed alliance, the British company said on Tuesday, amid fears that partnership talks crucial to its survival were near collapse.

'I want to underline the continued commitment from ourselves and from SAIC for a successful outcome to our joint venture,' John Towers, chairman of MG Rover, said in a statement.

Towers, who heads MG Rover's private holding company, said 'very extensive personal commitments' were being made to ensure a successful outcome to talks between MG Rover, the UK government and SAIC in Shanghai.

Under the proposed deal, SAIC would own 70% and MG Rover 30% of the joint venture, UK newspapers have reported. The venture would produce 1 million cars a year in both China and England, with the aim of rejuvenating the Rover model range and sales and giving SAIC a foothold in Europe.

Talks to salvage the joint venture resumed on Tuesday as sources close to both sides said a final decision to go ahead or drop the deal was expected by the end of the week for the former British icon, which dates to 1905.

SAIC has fears about a potential £400m pension black hole at MG Rover if the company collapsed. The Chinese company is threatening to walk away from a deal unless Tower and MG Rover's other British owners can provide additional guarantees about its financial security.

The UK Department of Trade and Industry (DTI) is considering offering a £100m bridging loan to help MG Rover secure a deal. MG Rover directly employs 6,000 staff at its plant in central England, and the UK government, which earlier on Tuesday called a May general election, fears thousands more jobs at local suppliers are also under threat.

The collapse of MG Rover would be another blow to Britain's fading glory as a carmaking centre. Ford, which owns luxury brand Jaguar, cut jobs and scaled back production in England last year.The sources said earlier Tuesday the joint venture proposal, under negotiation since last year, was looking rocky.

'The longer it drags on, the more you can't help but think these issues are actually insurmountable. It is expected that the current crisis will come to a head this week,' one industry source told Reuters.

A DTI spokeswoman said talks continued and the option of a bridging loan remained on the table.MG Rover was sold to Germany's BMW AG in the 1990s before returning to British hands when it was sold four years ago to private firm Phoenix Venture Holdings, led by Towers.