MG Rover job fears grow

CAR maker MG-Rover is locked in talks with a prospective business partner in China amid growing fears that agreement could result in thousands of job losses.

MG-Rover revealed in November that it was close to agreeing a deal with Shanghai Automotive Industry Corporation worth up to £1.5bn. But the Chinese expressed irritation at the announcement, describing it as 'premature'.

And car industry analysts say that although the deal was intended to counter a stream of negative publicity surrounding the pay and pensions packages of MG-Rover executives, its effect, to emphasise how much it needs the agreement, may have undermined its negotiating position.

Union leaders are so concerned that the deal could still unravel, threatening thousands of jobs at the company's Longbridge plant ? which borders several marginal Labour constituencies - that they are lobbying the Government for more direct involvement and support. But Labour has indicated that it has had no direct communication with MG-Rover at all.

A joint venture with the Chinese could lead to new investment at Longbridge. But in the absence of any agreement speculation as to SAIC's real motives is rife. And there's a limit to what the Government can do to help. It faces an election in just a few months' time and previous efforts to sweeten takeover deals ? such as the cash it paid British Aerospace to take over the company more than ten years ago ? ran into trouble with Brussels, which demanded the sweeteners be repaid.

Tony Woodley, general secretary of trade union the TGWU, said today that the Government must put all its weight behind a deal with a Chinese car manufacturer.

The joint venture with Shanghai Automotive was 'the last possible lifeline' for the giant plant near Birmingham, he said. The Government had been ready to offer £120m in funding for new models proposed for Longbridge by BMW before the German company sold MG-Rover four years ago, added Mr Woodley. Similar support should be offered now to ensure that the Shanghai deal goes ahead, he said.

'I think a deal is on track. It was always going to be difficult. This is a unique set of circumstances with the Chinese government for the very first time investing outside their own country. There is no doubt for Longbridge, it is the last possible lifeline that will keep this still very giant British car company alive and going. I expect our Government to do what any other European Government does, and indeed what our Government was going to do when BMW were going to bring in new models.'

Mr Woodley acknowledged speculation that a joint venture might lead to job losses at Longbridge. But he added: 'Clearly the speculation of thousands of job losses is very concerning, but as far as I am concerned, it is not warranted. The company is denying this and until we meet them next Thursday, I won't know the full ins and outs of whether this is just speculation or whether there is any truth in the rumours.'