China's biggest carmaker says it is highly unlikely to agree a rescue deal for MG Rover, as administrators battle to find a buyer for the firm which is losing up to £25 million a month.
About 6,000 MG Rover workers could be made redundant next week if administrators fail to find new investors to inject more money into Britain's last independent carmaker when emergency government funding runs out, administrators PwC said.
MG Rover, which once made the iconic Mini and Land Rover models, collapsed on Friday after failing to agree a rescue deal with China's Shanghai Automotive Industry Corp (SAIC).
The dramatic move could hardly have come at a worse time for the Labour Party, which is campaigning on the back of its economic record to win re-election on May 5 and is defending a number of slim majorities in seats around MG Rover's main Longbridge plant in Birmingham. Accountants PwC said yesterday it had received several expressions of interest in MG Rover over the weekend, but none of the parties had offered cash to keep the business going.
PwC also said it had contacted SAIC, but the Chinese firm dashed hopes it could be persuaded to return to the table while the company was under administration, a form of bankruptcy where accountants are bought in to try to save the business.
"Our position is unchanged at the moment. We still believe it is highly unlikely that SAIC would want to be involved with MG Rover while it is under administration," an SAIC spokesman said.
However, sources close to negotiations have said SAIC has not yet decided whether it would be interested in MG Rover assets if the company were broken up. SAIC owns the rights to some Rover brands under an earlier deal.
Investors specialising in troubled companies were also starting to circle the dozens of auto part suppliers who may be in trouble if Rover collapses. Around 15,000 jobs at suppliers could go if it is wound up.
"We might be looking at suppliers of MG Rover in trouble from their exposure," Mike Harris, partner at Rutland Fund Management Ltd, told Reuters.
PwC said there were no plans to resume car production despite a £6.5 million government loan to cover wages and expenses for a week, preventing the immediate lay-off of 6,000 workers who were sent home on full pay yesterday.
The European Commission said it expected the government to notify it about the emergency funding within the next 24 hours, adding that in theory no aid can be paid out if it has not been notified.
MG Rover has struggled to break even after being sold four years ago by Germany's BMW AG as tough competition from Japanese and European rivals hit sales.
Administrators said the firm had "very significant losses" of £20 to £25 million a month.
A source familiar with the situation said MG Rover and its administrators were hoping a sensitive approach with the Chinese would yield results, adding that for this reason PwC had made first contact with SAIC through its local Chinese office.
But other sources said that while SAIC's bankers may agree to listen to the administrators' proposals "out of courtesy" it was not considering a new deal.