Last minute talks are ongoing to rescue stricken UK car maker MG Rover.
Phoenix Venture Holdings, the owners of MG Rover, called in the receivers after the collapse late last week of a proposed joint venture with China's SAIC. The UK government is now to prop up MG Rover for a further week in a bid to resurrect the failed SAIC deal, but it remains difficult to see why the Chinese player would come back to the negotiating table.
Negotiations between SAIC and MG Rover broke down due to the delicate financial health of the car maker. The Chinese company was concerned that it could become responsible for Rover's pension fund and other liabilities if the proposed venture were to fail. Also, it was concerned about expected European Union regulatory scrutiny over a bridging loan that the British government was offering to help close the deal.
With no other suitors on the horizon, understandably, the future of 6,100 employees in the MG Group and around 15,000 jobs at component suppliers are uncertain. The upcoming UK general election is the biggest potential lifeline for the group at present. The government will have to be seen to be helping as much as it can, as the loss of so many associated jobs could prove very damaging to the Labour party's re-election campaign, but there is only so much it can do.
The hub of the issue is that, essentially, MG Rover needs SAIC more than the Chinese need MG Rover. Since an original announcement about the partnership was made in the autumn of 2004, the goalposts have moved considerably: SAIC has gained a hefty chunk of the Korean manufacturer Ssangyong, and - crucially - it bought some potentially vital intellectual property rights from Rover last year. It is only now emerging that these rights may already permit SAIC to build Rover engines in China (though it cannot use the Rover name). This is the ace in SAIC's hand: it did not gain such know-how from previous alliances with the likes of Volkswagen and GM.
Of the more salvageable parts of the business is the MG brand, and there is talk of establishing a small sportscar business at Longbridge to replace the full MG Rover operation. However, no company would bail the whole MG Rover group out solely on the weight of the MG marque. In short, despite last minute attempts to rescue the SAIC deal, one could fairly assume that it is the end of the road for MG Rover in its current form.
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