Rover bosses stage crisis talks

CRISIS talks are being held in China today between MG Rover chief executive Kevin Howe and car giant Shanghai Automotive in a desperate move to save the British car maker from collapse. At stake are 25,000 jobs in the Midlands.

A team of top officials from the Department of Industry is on hand with a £100m bridging loan that they hope will keep loss-making Rover afloat long enough to conclude the joint venture with China's biggest car company.

The officials are also understood to be insisting that the four businessmen, John Towers, John Edwards, Nick Stephenson and Peter Beale, who bought MG Rover from BMW for £10 in 2000, put up millions of pounds of their own money to show commitment to the joint venture.

The cash injection, funded by taxpayers, is vital as MG Rover faces the threat of running out of money before the deal is completed.

Financial Mail has learned that Rover would take a 25% stake in a new venture with the Chinese and would be liable for a quarter of the multi-million pound redundancy and pension costs.

Fearful that a proposed tie-up between the Shanghai Automotive Industrial Corporation and Rover could collapse before the General Election, threatening thousands of jobs and putting a dozen marginal Labour seats at risk, Tony Blair has intervened.

The DTI said: 'A team of officials is in China this weekend holding discussions with SAIC.

'If it appears that a commercial deal will be agreed, both MG Rover and SAIC are aware that the Government would consider the option of a bridging loan facility.'

The fate of 6,500 MG Rover workers and 18,000 component jobs in the Midlands depends on a deal with the Chinese motor giant. The Chinese, who are taking a 75% stake in the joint venture, are demanding that Rover proves it has the resources to pay its share - 25% - of pension liabilities and redundancy costs.

Failure to satisfy SAIC on these two issues could lead to the collapse of talks and MG Rover going bust.

It was clear by late last week that MG Rover did not have resources to give such a guarantee.

Sources close to the negotiations have told Financial Mail that MG Rover is expected to run out of cash later this month. Rover's chances of survival are put at only 50/50.

MG Rover said at the weekend: 'We have absolutely nothing to say.'

Sales are collapsing and morale is low as Rover struggles to sell its ageing models in an ever-more competitive market.