MercoPress. South Atlantic News Agency

MG Rover calls in receivers

Cash-strapped car manufacturer MG Rover Group is going into financial administration after a proposed takeover deal with a Chinese firm fell through, the British government said last night

??MG Rover has announced that their board has decided to call in the receivers,'' Trade and Industry Secretary Patricia Hewitt said.

Earlier yesterday, Rover ? the last major British-owned carmaker ? suspended production at its British factory and called on the government to firm up its offer of a 100 million pound (US$188 million) bridging loan to keep the company solvent and assist the proposed deal with Shanghai Automotive Industrial Co.

MG Rover executives and British government officials have been in China holding emergency talks with SAIC. Reports had suggested that the deal, announced in November by MG Rover, was close to collapsing because of Chinese concerns about the British manufacturer's perilous financial situation.

At a news conference late yesterday, Hewitt said the Chinese firm had ??made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal.''

MG Rover's situation had looked dire all day. The company said no cars were being built yesterday at its Longbridge plant in Birmingham, central England, because of component supply problems.

Peter Beale, vice chairman of Phoenix Venture Holdings, MG Rover's parent company, said earlier yesterday that speculation about Rover's ability to survive ??has affected the confidence of our suppliers and dealers and time is clearly running out.'' Beale had pushed for the government loan to be provided immediately to give MG Rover more time to complete the deal with SAIC. ??The PVH directors will provide 10 million pounds of personal money to convince the government of our commitment. What we need now is the government to decide,'' he said.

The troubles at MG Rover ? an industry stalwart that employs more than 6,000 Britons ? come at a sensitive time for the government, with a general election just four weeks away.

Hewitt had said earlier yesterday that the government would grant the loan ? provided the two sides came to a deal. ??The government stood ready to issue bridging finance of over 100 million to help, but without a deal there was no possibility of a bridging loan,'' Hewitt told reporters. ??SAIC, for their part, indicating that bridging loan finance would not have solved their concerns.'' She said the administration announcement was ??a devastating blow to all those involved ? the workers and their families, the company's suppliers and the wider community. Tonight our thoughts are with them.'' Hewitt said the government would work with unions and Rover's administrators to try and secure future car production at the 100-year-old Longbridge plant. She said details of a government support package would be released today.

SAIC's acquisition of MG Rover would have required approval from the Shanghai city government, SAIC's controlling shareholder, and the National Development and Reform Commission, a cabinet-level agency in charge of economic policy