MG Rover is close to agreeing a £1 billion deal with Shanghai Automotive Corporation that will produce cars for the fast-growing Chinese market and help secure the future of the giant Longbridge plant in Birmingham.
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A flurry of reports over the weekend said the deal would eventually result in four new car lines for MG Rover, including a new supermini, rather than just the one expected replacement for the ageing mid-size 45 model line launched as the 400 in 1995. Rover last week showed off two new ‘concepts’ – a coupe version of the 75 line and a hardtop variant of the MGF sportscar.
The Daily Telegraph said the new models – a medium-sized car, an executive model, a sports car and a small vehicle –- will be designed and developed by the current team at Longbridge with SAIC providing the finance. All four models, starting with the medium-sized car in 2006, will be produced both at Longbridge and in China.
The paper said Phoenix chairman John Towers hopes that once all the four models are introduced, one million cars a year will be manufactured – 200,000 at Longbridge (compared with the 110,000 projected for this year) and 800,000 in China.
According to the BBC, Towers insisted Longbridge would remain entirely in British hands.
Towers told the BBC he was confident the deal, which would see the Chinese company owning 70% of the new company and MG Rover 30%, would gain approval from the Chinese authorities in January.
He told a BBC regional news programme: “All the work associated with the joint venture is going on – the funding, the provision of people, the engineering development – they are happening.”
He also reportedly promised the 6,100 workers based at Longbridge there would be a massive roll-out of new cars as soon as Chinese money filters through – the new models could be on the road in just 14 months’ time.
MG Rover spokesman Stewart McKee told the BBC: “We do need the final approval of the Chinese authorities in order to proceed and that’s the point at which the final details will emerge. For both parties, this is a very good agreement.
“For MG Rover, we get the opportunity to sell cars in China, which is an expanding market. It also allows us to jointly fund the development of new products which is key to the growth of the business.”
BBC Midlands Today correspondent Robin Punt reportedly said many people would be surprised to hear money is already arriving from China.
“There’s a misconception that the firm will, as a result, become Chinese owned and controlled but that’s not true,” he added.
Tony Murphy, national officer of the Amicus union, told the BBC he was disappointed that the Chinese firm would have a majority holding.
He said: “We had hoped this would be an equal partnership, but obviously we hope this will enable Longbridge to stay open.”
Chinese investment is not Phoenix’s sole fund-raising source, however. The Daily Telegraph on Monday reported that Phoenix’s executives have agreed to offload 170 acres of land next to its main car making facility to raise £15 million in a sale and leaseback deal with St Modwen Properties, a local developer.
Phoenix spokesman Daniel Ward told the paper that there were no more large parcels of land left to sell at Longbridge.
Ward reportedly insisted that the SAIC deal was not the first step towards a Chinese takeover of MG Rover. “This is not a takeover, this is a partnership. The joint venture will hold all the intellectual property of all new car models, so that both partners can produce and sell new Rover cars as equal partners,” he told the Telegraph.
But the paper noted that Ward could not rule out SAIC eventually taking a minority stake in MG Rover.
Ward reportedly that any cash raised from the land sale would be reinvested in MG Rover’s car-making activities. He said: “There’s no question. Whenever this happens, the purpose is to reinvest the money in car-making.”
Phoenix has now raised £74.4 million by selling off virtually all of the extensive land at Longbridge in four transactions since April 2002, the Telegraph said.
The BBC said Towers leaves for the start of the final round of negotiations in China within the next two weeks.
