MG Rover's talks with Shanghai Automotive Industry Corp. (SAIC) over a co-operation agreement do not include the Chinese carmaker buying or taking a stake in the British automaker, a senior executive reportedly said.

"We cannot comment on any of the details in the arrangement but I can confirm that we have not discussed them acquiring us or taking a major equity stake in us," Peter Beale [director of MG Rover owner Phoenix Venture Holdings] told Reuters.

"We would be very flattered that an organisation as large and as successful as Shanghai Auto would be interested in approaching, but I think people have put two and two together and made five," Beale reportedly added.

Reuters said his comments came after the trade newspaper, Automotive News Europe, said on Monday that SAIC planned to buy privately held MG Rover as part of its expansion plans overseas.

Quoting sources in England and China, the paper said SAIC would boost its ambitions to become the world's sixth-largest automaker by taking an initial equity stake in MG Rover, the size of which was still under discussion.

"There is an absolute and definite plan which seems to start with some kind of joint deal," it quoted an MG Rover source as saying.

"SAIC will buy MG Rover," it quoted another source saying.

Reuters said rumours about a tie-up have circulated since June when SAIC and Rover said they signed a cooperation agreement.

So far, the two sides reportedly have refused to give any details about the agreement, saying only they have yet to receive central government approval. Beale told Reuters both sides were hoping to make an announcement before the end of the year, although he added the firm would not rule out any offer.

"Any offer from anybody would be assessed in terms of what is best for MG Rover Group and Longbridge as a long term volume manufacturer of cars in the UK," he told the news agency.

Separately, according to Reuters, the Financial Times newspaper reported on its website that attempts by Rover to share vehicle development costs with Malaysia's top car maker Proton Holdings Bhd. had been abandoned after six months of negotiations.

"There is unlikely to be any future co-operation with Proton," Beale was quoted by the paper as saying.

Reuters noted that independent car maker MG Rover has been struggling to break even after being sold four years ago by BMW AG for just £10 ($US18).

It has considered production sites in Slovakia and Poland in recent months as part of a desire to reduce its cost base, according to media reports, but no projects have yet materialised.

Britain's seventh-largest private equity group, Phoenix Venture Holdings Ltd, owns MG Rover now, Reuters added.

Automotive News Europe reported that, for its part, SAIC sees MG Rover's 1,247 western European dealers as a point of entry into Europe - the Chinese automaker is already the main Chinese partner of both General Motors and Volkswagen.

A source close to the situation said on Monday that the cooperative agreement would involve SAIC manufacturing and selling Rover cars in China, according to the Reuters report.

"Obviously the thing we're all looking for is volume," the source reportedly said. "New models do have an incredible upfront investment ... so if you can double the volume of the potential sales by going into new markets it halves the investment per car."

Specifically, Automotive News Europe reportedly said the plan envisions producing hatchback versions of the Rover 45 in Longbridge, England, and sedans in China, where there is almost no market for hatchbacks.

Reuters noted that SAIC aims to become one of the world's top six automakers by 2010 and has said it wants to list its stock overseas to raise a reported $2 billion. In July it reportedly agreed to buy South Korea's Ssangyong Motor Co, and executives have said Shanghai Auto would keep seeking overseas acquisitions and develop its own brand.

Reports in the Daily Telegraph and Times newspapers essentially mirrored that of Reuters.

But the Times place placed additional emphasis on the future of Rover's manufacturing facilities at Longbridge on the south-west outskirts of Birmingham.

If [Shanghai Automotive] were to make an approach we would consider it if it were in the best interests of the business," the paper quoted Phoenix Venture Holdings' Beale as saying.

Beale reportedly said that SAIC had not yet made a direct approach and that any deal would ensure that car manufacturing remains in the UK, where MG Rover employs 6,000 at Longbridge.

The paper said unions will want guarantees that UK manufacturing will [continue] but agree that MG Rover needs collaboration to survive in the long term.

Dave Osborne, of the Transport and General Workers Union, told the Times: "Our main priority will be to secure the future of Longbridge. But it is no secret that since 2000 there has been a need for a partner and that the company needs a cash injection to develop new products."

After recent controversy over directors' pay at MG Rover, Beale told The Times that none of the executives would personally benefit from another company taking a stake.

"None of us would benefit, it would all go into the business to secure the long term interests of the company," he reportedly said.

The Times noted that MG Rover's directors were hailed as heroes in 2000 when they achieved a takeover few thought possible.

But their public standing has fallen after a series of controversial management decisions and high executive pay, the paper added.