Chinese car maker Shanghai Automotive Industrial Corporation will decide early this week whether to try to overturn its defeat in the £60m battle for the assets of MG Rover.
SAIC and its advisers are understood to be furious over the decision of administrator PricewaterhouseCoopers late on Friday to sell the assets to rival Chinese manufacturer Nanjing, which is smaller than SAIC. They have spent the weekend considering their options and could make an announcement as early as today.
On Friday night SAIC said that it did not believe its bids were given "proper consideration", suggesting that it might consider a legal challenge against PwC. It may also seek to make Nanjing's plans to transfer the bulk of the Longbridge production lines to China more difficult by invoking the intellectual property rights for which it paid MG Rover £67m last year.
PwC has already defended the decision to choose Nanjing ahead of SAIC on the grounds that the former's bid was higher and unconditional while the latter's was lower and came with strings attached.
The issue of the IPRs is a complex one. Sources close to Nanjing suggest that SAIC does not have exclusive rights over parts which are common to both the MG and Rover and which cover almost every component. SAIC has always said it was comfortable with its legal position in relation to the IPRs, which suggests it takes a different view.
Despite the tensions between the two state-owned Chinese car makers the possibility of a deal is not being ruled out. "We are talking about two parts of China plc," said one observer.
Nanjing has meanwhile begun the task of recruiting a UK management team and is seeking partners for its plans to produce MG cars in the UK, although there is no guarantee that will be at Longbridge.
With the MG TF sports car production line expected to stay in Britain, corporate turnaround specialist David James and Alchemy partners - both of which have expressed interest in the sports car business - are being mentioned as potential partners.
Nanjing has the capacity to produce about 180,000 vehicles a year but would like to lift that figure to 300,000 by 2007 as part of its strategy of developing a place in the global automotive industry.
It will use the Longbridge equipment for volume production in China, possibly under the Austin badge. Sources close to Nanjing say it recognised MG as a niche brand with strong appeal in the UK and that the MG TF could be the first of a family of MG models to be built in the West Midlands under Nanjing ownership. Its business plan is reported to envisage a UK workforce of up to 2,000.
This week the trade unions are expected to meet representatives from Nanjing to discuss the carmaker's plans.
Tony Woodley, general secretary of the Transport & General Workers Union, has urged the two Chinese companies to work together in building cars at Longbridge. He said he believes that the "prize" of resuming mass car production in Birmingham had been missed because of the sale of the company to Nanjing.
