China’s Shanghai Automotive Industry Corp. reportedly said on Friday it was no longer in talks on a proposed car-making joint venture with troubled British car maker MG Rover.
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According to Reuters, Shanghai Automotive, China’s top car maker, also said it had done everything possible to secure an alliance with MG Rover but signalled there was no prospect of a deal still going ahead.
“SAIC was aware from the outset of these discussions of the potential risks and challenges to the proposed transaction caused principally by the weakened financial state of MG Rover,” a Shanghai Automotive spokesman told the news agency, adding: “However, it was not until detailed due diligence was undertaken by SAIC that the full extent of the financial liabilities of MG Rover became apparent.”
Shanghai Automotive reportedly was concerned MG Rover’s insolvency risks could result in “significant financial liabilities” for the joint venture.
“SAIC made all practicable and commercial efforts that may have allowed the proposed transaction to proceed,” the spokesman told Reuters.
Analysts told the news agency MG Rover assets could still end up in Shanghai Automotive’s hands. MG Rover was expected to be placed into administration later on Friday.
“You cannot imagine how badly the Chinese want it because they do not have whole-car capability and as bruised and battered as Rover is they can still deliver that in some form,” a banker who follows the sector closely told Reuters.
A source close to the situation told Reuters Shanghai Automotive had ruled out buying MG Rover from administration but had not yet decided whether it would be interested in some assets if it was broken up.
