MG Rover has denied reports that it could run out of cash as soon as Friday, as it tries to clinch a last-ditch deal to secure its future, the BBC reported.
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The broadcaster cited the Independent newspaper as saying Rover would be forced to call in the receivers by then unless it receives an emergency £100 million bridging loan from the UK government – the company employs 6,000 staff at its Longbridge plant on the outskirts of Birmingham in the West Midlands.
Government officials are in China for talks with Shanghai Automotive Industry Corp on a £1 billion investment in MG Rover, the BBC said.
It cited the Financial Times as saying the discussions had so far proved inconclusive.
There were a number of reports on Rover in UK newspapers over the weekend.
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By GlobalDataNoting this, the BBC said that the government had said it was ready to offer MG Rover a bridging loan – widely reported to be worth £100 million – to keep it afloat long enough to clinch an investment from China.
On Sunday, the Daily Telegraph reported that Patricia Hewitt, the UK trade and industry secretary, was planning to override the views of her most senior official by providing the bridging loan to MG Rover.
The paper said Catherine Bell, the acting permanent secretary at the Department of Trade and Industry, had told Hewitt that the loan would deprive the DTI of much-needed resources.
“Bell has made her views completely clear to the secretary of state, that she cannot recommend making the loan,” a DTI official told the paper, adding: “The help for Rover will prevent us from doing more valuable things. The decision to do it is a political one; the economic arguments don’t stack up.”
The BBC noted that Hewitt had said that talks between MG Rover and China’s biggest car maker were the “only hope” for the UK firm.
However, the broadcaster added, Shanghai executives are reported to be concerned about Rover’s viability amid reports of its worsening financial situation.
The Independent reportedly said Britain’s last volume car maker was on the brink of insolvency while the Financial Times was said to have reported that the company would run out of money within the next month.
Rover told the BBC it would not comment specifically on its own financial position but it denied that receivers would be appointed on Friday if the bridging loan was not secured.
“Clearly the discussions going on in Shanghai are very important and we will wait for the outcome,” a Rover spokesman told the broadcaster.
The BBC added that Rover has denied a report it has a £400 million hole in its pension fund that is jeopardising the deal.
A Rover spokesman told the broadcaster the figure was “completely misleading” and the firm had acknowledged a pensions shortfall of £67 million in its 2003 accounts published last October.
According to the BBC, the Observer newspaper reported on Sunday that an outline deal with SAIC had been ready for weeks but had not been signed because the Chinese firm feared MG Rover could soon go bust, leaving it to shoulder pensions liabilities – it put the shortfall at £400 million.
The paper reportedly quoted an adviser to SAIC as saying a new loan “may give everyone more time to negotiate the deal” but “if, as seems likely, Rover is close to insolvency, it does not mean the deal will be done.”
Industry experts told the BBC a deal was still a possibility but warned that time was fast running out.
“Clearly there is a cash flow problem here,” Garel Rees, director of the Centre for Automotive Research at Cardiff Business School, told the BBC, adding: “[MG Rover] has not got a great deal of funds over the next six months and I think that is the issue for the Chinese. They want to make sure the company does have funds for the immediate future.”
