The dramatic rescue of the MG Rover car group by one of China's biggest motor groups was welcomed last night by the government and trade union officials. The state-controlled Shanghai Automotive Industry Corporation (SAIC) has promised to invest up to £1.5 billion to keep the cash-strapped company afloat.
The deal - which will be formally approved by the Beijing government in January - has delighted ministers who feared that the 6,000 workforce at the company's Longbridge plant in Birmingham could have lost their jobs had the rescue not succeeded. Thousands more jobs will be saved at British-based component suppliers.
Tony Woodley, general secretary of the Transport and General Workers Union, said: 'MG Rover is going to be a real force in auto manufacturing after this deal, and Britain will continue to have a viable motor industry.'
Control will pass to a new holding company in which SAIC will have a 70 per cent stake and MG Rover 30 per cent. This will control MG Rover's assets and intellectual property rights. Downing Street had been particularly worried about another financial crisis at MG Rover approaching a general election. Longbridge is in Labour's West Midlands industrial heartland and the loss of manufacturing jobs at such a sensitive time would have been acutely embarrassing. The UK car firm, which was sold to a consortium of Midlands businessman in 2000 by German company BMW, has seen its position decline sharply over the past few years. Sales have plummeted and losses this year are expected to hit £100 million.
It had always been recognised that MG Rover's long-term viability depended on finding a partner to bankroll the development of a new range of models, but negotiations with Proton of Malaysia and China Brilliance failed to produce an agreement.
The company was also mired in controversy over a £16m pension fund established for its four directors, led by John Towers. Their salaries, an average of £1.15m each last year, have also come under fire.
SAIC is the fastest-growing of China's motor companies and already produces 600,000 vehicles in Shanghai for America's General Motors and Germany's Volkswagen. It aims to produce 6 million cars by 2020, making it the world's sixth-largest auto group, not far behind Japanese and American giants such as Toyota and Ford.
By linking with Rover, the Chinese gain access to British expertise in design and development. Woodley said: 'They have the production technology already, but need to beef up in areas like research and development, something which MG Rover is good at.'
MG Rover produces 110,000 cars at Longbridge, but Towers said: 'We could easily go to 200,000 and this deal will enable us to exactly that.'
The story of Rover over the years has been one of failure, shattered dreams and the squandering of hundreds of millions of pounds. By the early Seventies, it was part of British Leyland, where unions under the leadership of men such as Derek 'Red Robbo' Robinson began a series of damaging strikes.
Car production at Leyland went on the slide and new models were poorly designed and failed to appeal to motorists, who preferred cars from the US, Japan and Germany.
