Tony Blair's Labour government offered workers and suppliers at collapsed carmaker MG Rover £150 million in aid, seeking to limit the damage from up to 5,000 job losses as it seeks re-election.
Administrators said yesterday there was no hope of selling the last major British carmaker in one piece, and just under 5,000 workers would be made redundant immediately, dealing a blow to the ruling Labour party's image of economic competence.
"This is a desperate time for the workforce at Longbridge and their families. There is no point in me trying to pretend we can put together some magic deal to get another company to come in and take it over," Mr Blair told reporters in Birmingham in central England, not far from MG Rover's Longbridge plant.
Mr Blair, campaigning on the back of his economic record for re-election on May 5, said the aid would include redundancy payments, job training and site redevelopment.
The 100-year-old carmaker, which once made the iconic Mini and the Land Rover, stopped production last week after failing to secure a rescue deal with China's Shanghai Automotive Industry Corp (SAIC).
Administrators Pricewaterhouse-Coopers (PWC) said they would "mothball" the MG Rover plant over the next two months, effectively locking it up as they seek buyers for its assets.
"It has hit me like a brick. It's three-quarters of my life in this place. It's a very sad day for British motoring," Gordon Lane, 52, who has worked for the company for 29 years, said outside the Longbridge plant.
Most of the firm's 6,000 workforce will lose their jobs. Some staff will be retained to complete part-finished cars, along with staff at its engine-making division and MGF sports-car unit which could still be sold to a third party.
Chancellor of the Exchequer Gordon Brown delayed a trip to Washington to travel to Birmingham, along with Trade Secretary Patricia Hewitt, underlying the political sensitivity of the 100-year-old carmaker's collapse.
Longbridge lies close to three constituencies in which Mr Blair's Labour Party holds only slim majorities.
Mr Hewitt said the aid package comprised £50 million for training, £40 million to cover redundancy payments, £24 million to help other businesses affected by MG Rover's collapse and £42 million announced last week to help the firm's suppliers.
SAIC formally advised the UK government yesterday it would not resume talks on the future of the company, maker of MG sports cars and Rover saloons.
Unions said basic redundancy packages for workers, many of whom were also paying off loans on MG Rover cars, would not be enough.
"The one in a million chance we felt our people had has now been taken away," Transport & General Workers Union (TGWU) General Secretary Tony Woodley said.
Phoenix Venture Holdings, a consortium of British businessmen who own MG Rover, said in a statement it had explored all avenues to keep paying employees and had pledged directors' personal assets to keep the business alive.
PwC said it was now exploring options to break up MG Rover. It said there had been keen interest in some assets, and it would go back to SAIC to clarify the Chinese firm's position.
"We have concluded that there is no realistic prospect of obtaining sufficient further finance to retain the workforce while the position with other parties is explored," joint administrator Ian Powell said.
Around 15,000 jobs from auto parts suppliers in Britain may also be affected by the collapse. Car dealer Reg Vardy said its earnings for the year would be hit.
SAIC could still be interested in the carmaker's assets if the company went into liquidation, a source familiar with the situation has said.
SAIC owns the blueprints to some Rover cars, called intellectual property rights, which means they might bid for factory machinery to ship back to China to make the cars there, the source said.
A British institution dating back to 1905, MG Rover has in its various guises produced some classic cars alongside the Mini, including the Morris Oxford and Morris Minor, the Austin Seven, the MGB sports car and the cheap and cheerful Mini Metro.
"I am surprised the government did not get involved earlier in the day," opposition Conservative Party leader Michael Howard said, describing the collapse as a "dreadful blow".