The embattled car firm MG Rover today insisted it was on course for a rescue deal with a Chinese partner, dismissing reports of a £100m government sweetener to ensure the agreement as "rubbish".
The loss-making Midlands-based firm said it had made a "great deal of progress" in talks with the Shanghai Industry Automotive Corporation (SAIC), but strongly denied reports that the government had offered SAIC £100m to go ahead with a rescue package.
Describing the stories as "rubbish", an MG Rover spokesman said: "Our position remains that we have made a great deal of progress in our talks, and we remain very confident of reaching agreement with our Chinese partner.
"That is what we have been saying for some weeks, and that remains our position. The last step will be an agreement with the Chinese government, and that will be an important step."
The department of trade and industry refused to comment directly on the alleged £100m offer, which was reported in the Times. "The government supports the British automotive sector, but we are not going to go into any details of individual companies or any commercially confidential dealings," a spokesman said.
Nevertheless, the government is anxiously following developments at one of Britain's last remaining mass car manufacturers. The company employs around 6,500 people in the West Midlands, while 50,000 to 60,000 jobs in support industries depend on the company. The plant produces around 130,000 cars a year, and MG Rover has under 3% of the UK car market.
The prime minister, Tony Blair, has written a letter supporting the proposed deal, which was personally delivered to the Chinese government by the deputy prime minister, John Prescott, during a recent visit.
Government officials are said to be worried that negotiations could collapse in the run-up to the election, forcing MG Rover to tender a "begging bowl" and putting the government in an awkward position.
Since the MG Rover chairman, John Towers, announced in November that a deal with a Chinese car manufacturer would be clinched by the end of this month, the company has said little about the talks.
The announcement of an impending joint venture with SAIC - worth to £1.5bn and intended to save the British company's Longbridge plant - came as the brand's sales collapsed and the directors suffered adverse publicity generated by their multimillion-pound pay and pension fund awards.
MG Rover needs a partner to develop new models because it lacks the resources to invest in new models in a market dominated by much larger rivals in the US and Europe.
So far, SAIC has emphasised that the deal is far from complete. It also has worries closer to home, being concerned about a slowdown in the growth of its domestic market and too much capacity in the industry.
SAIC is regarded as MG Rover's last hope after failures with another Chinese company and Proton of Malaysia.
In May 2000, it was rescued after a consortium of local businessmen bought it from BMW for a nominal £10. Since the sale, MG Rover's losses have been reduced, but they are still running at £77m.
