BMW is increasingly optimistic it will reach agreement to sell its loss-making Rover unit to the Phoenix consortium, the Wall Street Journal reported on Friday, quoting a BMW executive.
“We are much more happy. We are more optimistic than we were a week ago,” the executive at the German group said.
A previous bid by Phoenix of Britain was rejected by BMW but the consortium has re-emerged as a serious contender after the abrupt collapse last week of negotiations between BMW and London-based venture capitalists Alchemy Partners.
At the time, BMW set a deadline of the end of this month to achieve a sale agreement or to close down Rover.
Talks resumed between BMW and the Phoenix consortium, led by former Rover chief executive John Towers, on Tuesday.
According to the Wall Street Journal report, executives from BMW had been in “intense contact” and had planned another meeting for Friday.
A person close to the negotiations said Phoenix had sent “indications” to BMW that it would be able to line up financial backing for its bid, the Journal added.
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Previously, negotiations had faltered because Phoenix apparently lacked financial backing.
Meanwhile, the Daily Telegraph newspaper here reported that BMW faced a bill of 1.6 billion pounds (2.7 billion euros, 2.4 billion dollars) if it fails to sell Rover and closed Rover at the end of the month — double what it would have to pay if it sold the company.
Quoting insiders, it said BMW had underestimated the cost of closing Rover’s Longbridge plant in central England, which employs 8,500 workers, who would all need redundancy pay.
Fearful of losing support in its traditional heartland, the governing Labour government has made clear its support for the Phoenix bid because it would result in fewer jobs being axed than would be the case under Alchemy’s plans for Rover.
On Friday, Labour was assessing the damage following its worst electoral performance since Prime Minister Tony Blair’s election in 1997 as support for the party ebbed to below 30 percent in local council polls.
The Telegraph quoted Eric Walters, a partner at Alchemy, as saying: “Today being election day, BMW being more sensitive to the British political scene, and the Phoenix consoritum being more political than real, it will be interesting to see what happens in the next few days.”