MG Rover is still on course to break even next year and reach profitability in 2003, Kevin Howe, chief executive of the car manufacturer, said yesterday.

Mr Howe said breakeven in 2002, three years after Rover lost almost £800m, was "still our aspiration" as the company increased its profits potential through a deal with Caterpillar to build a £250m global parts operation.

He said in an interview that the company was concluding a review of its business plan because the euro had proved weaker than expected, affecting sales and the transfer price of components.

"We are still confident we will be reporting a number south of £200m for this year. The aspiration is we break even next year and even if we cannot it will not be country miles away.

"We will have to factor in an even more conservative view of the exchange rate. We went 5% worse than the worst prediction we could find and the euro has proved to be very volatile."

Rover, which sold 83,167 cars in the UK in the first 10 months, giving it a 3.87% share of what is likely to be a record market of 2.4m cars this year, expects to sell 175,000 worldwide in 2001.

Mr Howe said final UK sales at just under 100,000 would beat Rover's targets "sky high" but that European sales had under-performed because of poor markets in France and Italy. Next year, when the UK market should be closer to2.2m, would be "tough".

Rover is close to deciding whether to build a new medium-sized car, due in 2004 to replace the 25 and 45 series. It will finance the bulk of the £300m project, critical to its future and likely to see annual output of 150,000 cars, from its own funds.

Mr Howe said that the company, which joined forces with Lola in January to launch an MG racing car (above), is still in talks with another manufacturer about sharing a new "platform" for the car, which will compete with the likes of the Golf and Focus, or allowing it to develop a new car on the R75 platform.

He dismissed as "complete rubbish" reports that talks with suppliers had proved unrewarding.