Nanjing Automotive has succeeded in its battle to purchase MG Rover. Yet, despite promises of job creation in the UK, the deal has already been criticised, with Nanjing’s bidding rival SAIC suggesting its bid would have led to more UK jobs. However, with Nanjing ready to make tangible investment in the collapsed firm, this may yet prove the best outcome possible.
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Following a three month-long battle, China’s oldest carmaker, Nanjing Automotive, has secured control of MG Rover. The Chinese company is now in a position to take on Rover’s assets and plan its future. Indeed, the joint administrator of the project, PwC’s Tony Lomas, has indicated that Nanjing already plans to start hiring staff to help develop and implement a business strategy.
The takeover has been welcomed by former Rover workers in light of suggestions that Nanjing could create as many as 2,000 jobs in the UK. Yet although Nanjing intends to retain some car production plants in the UK, it is likely that the Powertrain engine plant will be moved to China. In addition, much of the UK employment is likely to be linked to the development of an R&D facility, rather than being a base for labour-intensive car production.
Fellow Chinese automaker SAIC has been quick to criticize the sale: SAIC was still finalizing its bid when the Nanjing deal was agreed. SAIC believed its bid was significantly higher and better for job creation in the UK. Nanjing’s rival also inherited the intellectual property rights for the Rover 25 and 75 models in China in a previous deal with MG Rover but Nanjing has dismissed suggestions that this could be a source of conflict. Some kind of joint venture would seem the best and most likely option for both firms to resolve any dispute over intellectual property.
The Nanjing deal may not be the best available, but none of the bids was likely to restore production at the Longbridge plant to its former glory. While it is clear that the viability of any takeover of Rover would rely on a significant relocation of production to a low labour cost country, acquisition by Nanjing does seem likely to provide former Rover workers with some hope at least. It could well prove the least worst option.
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By GlobalDataSOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
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