MG Rover rescue talks resume

LONDON - Talks to salvage a British-Chinese carmaking joint venture crucial for MG Rover's survival resumed on Tuesday amid fears the proposed partnership may collapse as early as this week.

Both sides involved in talks between China's Shanghai Automotive Industry Corp (SAIC) and the UK government about financial support for MG Rover said a conclusion was close.

MG Rover said it would make a statement later Tuesday on the make-or-break negotiations between the Department of Trade and Industry (DTI) and SAIC in Shanghai.

DTI is considering offering a £100 million ($265 million) bridging loan to MG Rover to help secure a deal but sources say SAIC needs additional guarantees from MG Rover's parent company about the carmaker's long-term financial security.

"The longer it drags on the more you can't help but think these issues are actually insurmountable. It is expected that the current crisis will come to a head this week," one industry source told Reuters.

An MG Rover spokesman and DTI spokeswoman said talks would resume in Shanghai today but declined to comment further. The DTI said the option of a bridging loan remained on the table.

SAIC is concerned about its exposure to potential £400 million pension black hole, as well as additional redundancy costs, if MG Rover became insolvent.

The UK government is keen to secure a deal which is vital for the future of 6000 jobs at MG Rover's Longbridge plant in central England and potentially thousands more from local suppliers. The government announced a May 5 general election on Tuesday.

Unions representing workers at the plant also expect a conclusion later this week.

MG Rover and SAIC have been in talks since last year to create a partnership that would give SAIC a foothold in Europe and rejuvenate the Rover model range.

Rover has been struggling to break even since it was sold four years ago by Germany's BMW AG to private firm Phoenix Venture Holdings, led by former Rover executive John Towers.

- REUTERS