Three appeal court judges yesterday tore up an agreement protecting MG Rover workers against compulsory job losses. The decision raised fears that the loss-making company could cut the workforce at its Longbridge plant.

However, in welcoming the appeal court ruling, MG Rover insisted that it would continue to avoid compulsory redundancies wherever possible.

The so-called jobs-for-life case was brought by a Longbridge worker, Kulvinder Kaur, under a deal negotiated between MG Rover unions and the company's previous owner, BMW, in 1997. That agreement provided guarantees against compulsory redundancy in exchange for more flexible working practices.

Ms Kaur brought the case after facing the loss of her job. Though the threat was lifted when she was moved to another department, she continued to fight the action.

Terry Pye, a regional official of the manufacturing union Amicus, said: "We are obviously extremely disappointed with the decision, which could mean the company pressing ahead with planned redun dancies at Longbridge. We are seeking urgent advice from our lawyers on whether we can appeal to the House of Lords."

An MG Rover spokesman said: "The company welcomes the unanimous ruling in favour of the company's right to manage the business in the face of changing business conditions.

"However, it will not change the way MG Rover works with the trade unions to avoid compulsory redundancies wherever possible."

The Transport & General Workers' Union echoed Amicus's disappointment at the decision, arguing that the decision was in effect a judgment against the union. But it was encouraged by the indications from the company that it would seek to avoid compulsory redundancies.

Rover's UK sales are down 23% so far this year and MG down almost 15%. The company said it was cutting production over eight days between now and Christmas in order to "rebalance stocks".

MG Rover is looking to cut costs by about £100m, though executives have said in the past that the focus is on reducing costs in its supply chain rather than cutting the 6,100-strong Longbridge workforce.