£40m support package to MG Rover

The Government has announced a £40m support package for suppliers to the MG Rover car industry. The announcement followed Mr Blair’s pledge on Friday to do whatever he could to support a rescue deal and, on Saturday, Mr Brown announced an inquiry into the finances of Phoenix Ventures, the manufacturer’s parent company.

Emergency funding will be provided to stave off the redundancies of MG Rover’s 6,000 workers, the Trade and Industry Secretary Patricia Hewitt has announced.

The failure of the talks leaves the jobs of 6,000 people at MG Rover’s Longbridge plant in Birmingham in jeopardy. Ms Hewitt said that the Government had offered a £6.5m loan which will pay wages and expenses for one week in order to keep the company afloat in case a possible deal can be secured. A spokeswoman added that she would be prepared to fly to China with trade union leaders to try to resolve the crisis.

MG Rover said Friday that it had filed for administration, a form of creditor protection, and appointed PricewaterhouseCoopers LLP, the Department of Trade and Industry (DTI) and trade unions, in a last-minute attempt to keep the company trading.

Following the announcement, Tony Woodley, the general secretary of the Transport and General Workers’ Union, who will address a mass meeting of MG Rover workers today, said: “We will monitor the situation closely and review the adequacy of funds available.”

Concern remains that PWC could find it impossible to achieve either of MG Rover’s best hopes for survival: a sale of MG Rover, or a deal with Shanghai Automotive Industry Corporation (SAIC).

If it is confirmed that SAIC holds the intellectual property rights to the Rover 25, the 75 and the K series engine then it already has the technology to build Rover cars in China. It could also block a deal with any other buyer. A source close to the company said: “We own the product; it cannot be sold, disposed of, or made without SAIC’s permission.”

However, John Towers, MG Rover’s chairman, insisted that a deal with SAIC was still possible.

“There is still a very strong strategic impetus for SAIC to go ahead with the deal,” he said. “Given the powerful support and involvement of the Prime Minister, Chancellor, Secretary of State, trade unions and the combined effort of the DTI to support and reinvigorate this process, we should have some optimism for the outcome.”

If SAIC does decide to begin manufacturing Rover in China, leaving thousands of British workers out of a job, a furious political row is likely.

“Government must have known what was going on a year ago and they seem to have been very slow and very late into the business of seeing what they could do to help.”

“In spite of the possibility of the British Government making available short-term bridging finances, SAIC’s fundamental concerns relating to the ongoing financial state of MG Rover were not resolved,�? SAIC said.