Nanjing Auto buys collapsed British MG Rover
(Agencies)
Updated: 2005-07-23 11:06

Administrators for MG Rover Group Ltd. have said that the collapsed British automaker has been bought by Chinese carmaker Nanjing Automobile (Group) Corp.

The announcement Friday ended months of speculation about the future of Rover, the country's last major automaker, but also raised questions about how much production Nanjing would retain in Britain - and how many jobs would be involved.

PricewaterhouseCoopers, which took over administration of Rover when the automaker filed for bankruptcy in April, said Nanjing had bought the assets of both MG Rover Group and its engine-producing subsidiary, Powertrain Ltd.

The terms were not disclosed. A person close to the deal, however, said Nanjing paid just over 50 million pounds (US$87 million; 73 million euros).

Nanjing had faced two competitors in its bid to buy Rover's assets - a similar offer from China's state-owned Shanghai Automotive Industry Corp, which prompted the company's collapse earlier this year when it pulled out of talks about a merger, and an offer by British businessman David James to buy two parts of the company.

Tony Lomas, joint administrator at PwC, said in a statement that the "level and conditionality of SAIC's bid left Nanjing's bid as the preferred way forward."

Unions had supported the SAIC deal because they believed it was the most likely to restart substantial production at Rover's Longbridge plant in central England, which was forced to close with the loss of 6,000 jobs when the company collapsed.

"Having viewed both the Nanjing and SAIC bids, there is no doubt in our mind that on first viewing the SAIC proposals appeared to suggest more jobs for Britain," said Tony Woodley, general secretary of the Transport and General Workers Union. "It's disappointing, therefore, that the administrators have not seen fit to allow SAIC to complete its bidding process."

Woodley said the union will now seek talks with Nanjing to discuss jobs.

Lomas said Nanjing plans to begin hiring staff to implement its plan for the company, which includes relocating the engine plant and some of the car production to China, while retaining some production in Britain. It also plans to develop a research and development and technical facility here.

Rover had hoped the earlier deal with SAIC would generate cash to allow it to introduce new models and stem the falling sales of its current makes. The company, which turned out 40 percent of the cars bought in Britain in the 1960s, had not produced a new model since 1998 and held only a 3 percent share of the market at the time of its collapse.

The British government plowed millions of pounds in emergency loans into the company to keep it operating for a short time as its bankruptcy provided an embarrassing backdrop to the ruling Labour Party's election campaign, which was centered on the strength of the British economy.

PwC ended those loans and closed the factory when the prospects of a bidder for the entire group appeared to vanish.

Some intellectual property rights for Rover models were sold to SAIC in a 67 million pound deal last year, but the Chinese company does not hold the rights to produce the cars in Asia.

German car maker BMW AG has the rights to the Rover name, retaining them when it sold the company to Phoenix Venture Holdings for a token 10 pounds in 2000. BMW gave MG Rover permission to use the name indefinitely for free under a licensing agreement and said it would consider letting another company use the name. BMW sold the rights to the MG name to Phoenix in the same deal.

The directors of Phoenix have been criticized for paying themselves significant salaries and pensions as the company was falling into the red. The so-called "Phoenix Four" offered assets of up to 30 million pounds to assist Rover as it tried to resuscitate talks with SAIC in April, but acknowledged that the assets on offer were subject to attack from creditors.

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