MG Rover, the troubled car maker, yesterday signed up a new partner, Proton, the struggling Malaysian auto manufacturer, and is seeking further allies in its efforts to secure its future.
Britain's last independent volume car manufacturer said Phoenix Venture Holdings, its parent, had signed a letter of intent with Proton "to explore the feasibility of a number of collaborative projects".
The company, which had planned to keep the agreement secret, was forced to act after Proton made a regulatory announcement to the Kuala Lumpur stock exchange.
Rover has spent more than three years seeking a partner to develop its make-or-break new medium sized car, now due out late next year. It said it was talking to a number of other potential partners, including some in China.
Rover refused to disclose details of any collaboration with Proton, which owns Lotus, the sports cars company, but it emerged that the Malaysians re-approached Phoenix after earlier talks broke down two years ago.
John Towers, Phoenix chairman, then offered it a 20% stake in Rover in return for engineering help but industry sources indicated yesterday that the new deal could mirror that with Indian producer Tata.
The Indians are producing 40,000 small cars, known as CityRovers, for the British group whose sales have been hit by revelations about the £31m awarded by the four Phoenix directors - who bought Rover for £10 - to themselves.
Professor Sir Kumar Bhattacharyy, head of Warwick University's manufacturing group and an auto industry adviser, said: "Rover is seeking to gain access to the engineering skills of Lotus while Proton, like Tata, wants to use Rover's showrooms to market its cars."
Professor Garel Rhys, head of the automotive research centre at Cardiff business school, said Proton could never be Rover's main partner and the British company was seeking a new Chinese partner after the collapse of its alliance with China Brilliance in late 2002.
"Proton is attractive to Rover because it is about the only car company to make cars that look unlike any other and it doesn't dominate it in size. Anyone else would overwhelm them - and Proton, which could help produce new cars, perhaps engines and gear-boxes, also operates in a right-hand-drive country," he said.
Proton, which recently launched its new Gen.2 model, has been under pressure to find a foreign partner to halt its falling market share and help it survive without the high import tariffs which have protected it for two decades.
Abdullah Badawi, the new Malaysian premier, said the days of state protection would soon end and urged Proton to become more competitive, though he then raised duties on foreign cars.
Japan's Mitsubishi, which owns 15.9% of Proton, and India's Hindustan Motors, have been cited as potential bidders for the Malaysian car maker. Proton's domestic market share is less than 50% and its profits are falling.
"It is slowly dying," one foreign banker said. "Unless the government wants to keep throwing money at it, there's no way it can survive without radical change and that can only be done with outside help."
Rover, meanwhile, has become the sole bidder for a disused Daewoo car plant in Poland and has discussed plans for a £200m factory in Slovakia.
