Rover denies Labour's £100m give-away

BELEAGUERED car maker Rover insisted today that it is still pressing ahead with a planned partnership with a leading Chinese motor manufacturer, and described reports that the British Government has offered a £100m sweetener to make the deal happen as 'rubbish'.

MG Rover predicted last year that a deal with Shanghai Automotive Industry Corporation would be signed this month. But the announcement appeared to anger the Chinese, who declared that the agreement to prevent the Midlands car maker's collapse was not a 'done deal'.

Since then there has been conspicuous silence. But ministers were today reported to have indicated that a £100m sweetener could be paid to SAIC to 'encourage' the agreement. Rover today, however, said that discussions with SAIC continued to make progress though there was still no timetable for a final agreement.

A spokesman said there had been no discussions about any Government aid to the Chinese firm as a way of smoothing the deal. He described the report this morning as 'rubbish', adding: 'Our position remains that we have made a great deal of progress in our talks and we remain very confident of reaching agreement with our Chinese partner. That is what we have been saying for some weeks and that remains our position. The last step will be an agreement with the Chinese Government and that will be an important step. A huge amount of work is going on around the projects that will be central to the partnership.

The Department of Trade and Industry refused to comment directly on the reported £100m offer. A previous sweetener, paid by the Conservative Government to British Aerospace (now BAE Systems) when it first bought Rover was ruled illegal by the European Union ? and the company was forced to repay it. A DTI spokesman said today: 'The Government supports the British automotive sector but we are not going to go into any details of individual companies or any commercially confidential dealings.'

Unions believe that that Rover's future depends on the proposed agreement with SAIC. Tony Woodley, general secretary of the Transport and General Workers Union said last week that Rover was in the 'last chance saloon', describing the proposed partnership as 'the only show in town'.

Although Rover's management team secured huge union and consumer support in 2000 when it rescued Rover, the directors have since squandered public sympathy. The team have been heavily criticised for paying themselves huge sums from the loss-making business and it has failed to come up with an important new mid-range car design, seen as crucial to the company's prospects.

MG Rover employs about 6,500 workers at its plant in Longbridge, Birmingham, although tens of thousands of jobs rely on the factory, which produces 130,000 cars a year. Labour are sensitive to Rover's predicament because it sits in the middle of a number of marginal constituencies in and around Birmingham. The high concentration of Muslim voters there is also a threat to the re-election prospects of several Labour MPs since many actively opposed the war in Iraq.

Prime Minister Tony Blair has written a letter supporting the proposed deal, which was personally delivered to the Chinese Government by Deputy Prime Minister John Prescott during a recent visit.