Rover warns it is running out of cash

MG Rover has told the Government that it will run out of cash in April unless the Chinese state-owned motor company Shanghai Auto comes to the rescue.

John Towers, one of the four founding directors of the company, warned Trade and Industry Secretary Patricia Hewitt of the crisis at a meeting in September, it has emerged.

The Birmingham company lost £77m last year, sales are plunging and funds for research and development are drying up.

Unless the company can produce-new models, losses are expected to soar and the jobs of tens of thousands of Midlands workers could be at risk.

The company admitted last month that its future depended on a joint venture with Shanghai Auto. It said the Chinese were expected to sign a deal to produce and develop cars in China and the Longbridge plant in Birmingham.

But suggestions by MG Rover that the Chinese were prepared to invest £1bn for a 70% stake in the joint venture have been dismissed by Shanghai Auto, China's largest car maker.

Senior executive Xue Hao said: 'As to the investment or scope of co-operation, we're still unsure.' He said his company was in no rush to complete a deal by January, adding: 'We don't know when anything will be formalised.'

Shanghai Auto is believed to have found British reports of the deal 'embarrassing'.

MG Rover tried to distance itself from the £1bn investment figure. A spokesman said it remains confident that a joint venture will be struck, but refused to discuss the the meeting.

Under the prospective Chinese deal, car production at Longbridge would be increased to 200,000 within a couple of years. The Chinese would get access to Rover's technology and its 1,247-strong European dealer network.

In 2000, Towers and three fellow directors paid BMW £10 for the company and were given a 'dowry' of £500m.

Since then production has halved.