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April 8, 2005

BREAKING NEWS: UK (updated 16.45BST): MG Rover goes into administration

It was official at about 2.30pm BST today: MG Rover has appointed PrivwaterhouseCoopers (PwC) as administrators for the car and Powertrain engine-making companies.

It was official at about 2.30pm BST today: MG Rover has appointed PrivwaterhouseCoopers (PwC) as administrators for the car and Powertrain engine-making companies.

Workers had been told to turn up next week for work though one worker reportedly told TV news he had been told the company could not afford to pay staff beyond Monday.

The future of MG Rover and its 6,000-strong workforce had been in doubt since late on Thursday night amid uncertainty as to whether the car maker had gone into administration.

While UK government trade secretary Patricia Hewitt said in televised comments on Thursday night – accompanied by Tony Woodley, general secretary of the Transport and General Workers Union – that the firm had called in the administrators, MG Rover reportedly quickly denied this was the case.

The car maker told the BBC it had merely asked PwC to advise on its position.

With a month to the UK general election, the fate of MG Rover looks like turning into a major political issue, the broadcaster noted.

A spokesman for the Department of Trade and Industry, told the BBC that MG Rover chairman John Towers had phoned Ms Hewitt and “confirmed that the board had decided to call in the receivers”.

Union official Woodley reportedly also confirmed that he too had been told by Towers that MG Rover had gone into administration.

“They [MG Rover] agreed the wording of the statement that was read out by Patricia Hewitt,” Woodley told the BBC.

Separately, Sky News reported that Shanghai Automotive Industry Corporation had said it pulled out of negotiations because grant aid had not been forthcoming.

It quoted Hewitt as saying: “SAIC made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal. The government stood ready to issue bridging finance of over £100 million to help, but without a deal there was no possibility of a bridging loan.”

Hewitt reportedly added:: “All parties have agreed that we must now give our full support to the workers and their families, and the suppliers and communities affected.”

Sky News said she promised the government and unions would pull out all the stops to try to secure future car manufacturing at Longbridge.

Its “substantial support package” would include a task force led by the chairman of Advantage West Midlands – further details will be announced on Friday, Sky News added.

Around 6,000 jobs are directly affected at MG Rover’s Longbridge plant near Birmingham and estimates suggest at least 20,000 supplier posts in surrounding areas are also threatened.

On Wednesday, MG Rover denied that China’s Shanghai Automotive (SAIC) had pulled out of talks over a joint venture.

Earlier in the day, industry sources close to the negotiations had told just-auto that SAIC had pulled out of the talks and that the withdrawal was being interpreted as final rather than temporary.

The move followed growing concern on the Chinese side at the precarious state of MG Rover’s finances.

At lunchtime on Thursday, MG Rover was reported to have suspended production at Longbridge due to a shortage of components – suppliers stopped shipments to the company because of the uncertainty surrounding its future.

Around 8pm on Thursday, the BBC reported that MG Rover had said it faced imminent collapse unless the UK government gave it the £100 million ($US187 million) bridging loan – the broadcaster said the warning came as talks with SAIC on a rescue deal – in which the loan was a key point – appeared close to failure.

“If the bridging loan is not offered to us by the government, we’re facing the tragic closure of Longbridge,” Peter Beale, the vice chairman of MG Rover’s parent company, Phoenix Venture Holdings, told the BBC.

“We need just £100 million to see us through the next couple of weeks,” he reportedly added.

The company’s situation was “looking very, very desperate” without the loan, the BBC said.

That early evening report noted that MG Rover risked being forced into administration if the talks with Shanghai Automotive failed.

Longbridge production stops

SAIC pull-out denied

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