According to reports, MG Rover is close to merging with Shanghai Automotive Industry Corporation (SAIC). The deal, which the UK company's top execs have admitted is at an advanced stage, will inject £1bn into the new company in return for a 70 per cent share. The deal, if it goes ahead, will mark the end of indigenous mass manufacturing of cars in Britain.
Rover workers' unions are said to be delighted as it could safeguard their 5,200 jobs at Longbridge, although sadness was also expressed at the minority share of the venture.
Chairman of Rover's holding company Phoenix Venture Holdings John Towers, said, "The future of the company rests on this deal. It is absolutely critical, but we are confident we are going to bring it to the table."
The move takes place against a sour note, as expressed by BMW's UK MD Jim O'Donnell recently. He called the Phoenix directors the unacceptable face of capitalism, because they were allegedly paying themselves £16m including salaries and pension contributions, even though Rover lost £89m last year. O'Donnell contrasted that with BMW’s board which paid itself £7.5m against a background of £2.24bn profits.
BMW famously pulled out of ownership of the carmaking group after having pumped in £2.5bn to try and move MG Rover up a gear, selling it to its current management for a token £10.
Reports suggest that there will be separate British and Chinese organisations to build new models in both Birmingham and Shanghai, while the Chinese-controlled joint venture will manage and own both key assets and the intellectual property rights.
Advantages cited for the move include savings made by producing cars jointly with the Chinese to try and staunch the haemorrhaging accounts. It should allow MG Rover to build cheaper models as well as providing it with an entry point into the fast-growing Chinese market.
The deal could represent the biggest beachhead into Europe yet achieved by a Chinese car manufacturer. And the Chinese company, which has plans to become one of the top six carmakers by 2010, is also the main Far Eastern partner for General Motors and VW.
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