John Moulton, the venture capitalist who unsuccessfully tried to buy Rover from BMW four years ago, yesterday expressed scepticism that the Chinese were about to invest £1bn in the British car firm.
"Its hard to see why anyone would do it because Rover is small and does not bring any really new technology," he said.
MG Rover can only survive in the long term if it develops a new model range and that involves a "wall of cash" said Mr Moulton.
The comments came as MG Rover's putative Chinese partner distanced itself from reports that it is to rescue the British car maker. Shanghai Automotive Industry Corporation (SAIC), said by MG Rover to be on the verge of agreeing to a life-saving collaboration, yesterday suggested talk of a rescue deal was premature.
"In fact, we're still in negotiations. There's been no final conclusion. As to the investment or scope of cooperation, we're still unsure," said Xue Hao, a spokesman for Shanghai Automotive Industry Corp.
SAIC executives are reported to be embarrassed by MG Rover's assertions that a deal will be agreed in January, which will ultimately lead to a £1bn investment to develop a range of models that will be produced at MG Rover's Longbridge plant in Birmingham.
That embarrassment stems from confusion over two separate, but parallel, series of negotiations taking place.
MG Rover announced in June that it was entering into an exclusive agreement with SAIC aimed at developing a far reaching strategic relationship.
In August MG Rover signed a deal to sell technology owned by the car company and its Powertrain engines and transmission business to SAIC. The Chinese have paid MG Rover about £40m for this technology. Talks to formalise this arrangement are continuing.
However, the discussions to set up the joint venture do not cover the cash SAIC might put up to fund development of new models to be built at Long bridge. Those negotiations are separate.
MG Rover is hopeful it will secure a Chinese commitment to invest about £1bn to develop a model range, though the company said this issue had to be viewed alongside rather than as part of the design and development joint venture.
"The Chinese joint venture and the investment in new Rover models are two entirely different things," a spokesman said.
John Towers, MG Rover's chairman, said this week the joint venture itself may not deliver any new cash to the car firm. Yesterday MG Rover insisted the £1bn figure expected from the Chinese derived from media speculation.
