updated 4/15/2005 8:22:01 AM ET 2005-04-15T12:22:01

Administrators for MG Rover Group said Friday that the Shanghai Automotive Industry Corp. has decided not to renew talks about a joint venture and ruled out the prospect of selling Britain’s last major car manufacturer to another buyer.

PricewaterhouseCoopers LLP, which was appointed to oversee the company’s future after it closed its British factory and filed for a form of bankruptcy a week ago, will likely now break up MG Rover and sell off the parts to repay its many creditors.

PwC said SAIC’s decision will result in significant layoffs.

“We have received a copy of a letter from SAIC early this morning which communicates to the DTI (government’s Department of Trade and Industry) that they are not willing to acquire either the whole or part of the business on a going concern basis,” said Ian Powell, joint administrator at PwC.

Rover’s downfall was precipitated by the failure of talks with China’s state-owned SAIC, and renewing the negotiations had been seen as the best chance of saving the company — and the jobs of some 6,000 workers at its Longbridge factory in central England.

PwC, which revealed last week that Rover is losing 20 million pounds to 25 million pounds ($38 million to $47 million) each month, said that in addition to exploring the potential of a deal with SAIC, PwC had looked into “a number of other inquiries.”

“In our view, none of these is capable in resulting in a sale of the complete business,” said joint administrator Tony Lomas.

Rover had hoped the deal with SAIC would generate cash to allow it to introduce new models and stem the falling sales of its current makes. The company, which turned out 40 percent of the cars bought in Britain in the 1960s, has not produced a new model since 1998 and now holds only a 3 percent share of the market.

The British government, which has been heavily involved in discussions about the crisis — coming just weeks ahead of a general election — provided a 6.5 million pound ($12.2 million) emergency loan Sunday to pay Longbridge workers for a week.

Powell said that following SAIC’s letter, “we have concluded that there is no realistic prospect of obtaining sufficient further finance to retain the work force while the position with other parties is explored.”

“As we indicated earlier in the week, significant redundancies will now be effected,” he added.

Trade Secretary Patricia Hewitt said the government was putting together a support package for the workers.

“This is devastating news for the workers, their families and the wider community,” Hewitt said. “Over the last week the unions and government have done everything possible to try and secure Longbridge’s future as a going concern.”

Tony Woodley, general secretary of the Transport and General Workers’ Union, said the “worst fears” of the MG Rover workers and around 18,000 other employees at firms that supply the carmaker had been realized.

“The one in a million chance we felt our people had has now been taken away. We have worked hard this week with the administrators to develop a sound business plan to present to Shanghai Automotive Industry Corporation,” he said. “But it does take two to talk and that opportunity has now gone.”

Woodley said that the union will hold urgent talks with PwC to discuss the future of the workers.

The directors of Phoenix Venture Holdings, Rover’s parent company, have been criticized for paying themselves significant salaries and pensions as the company was falling into the red.

The four directors of Phoenix Venture Holdings bought Rover from BMW for a token 10 pounds in 2000, after BMW suffered losses of around $6 billion in six years. Unions are unhappy about a 13 million pound ($25 million) trust fund they set up that mainly benefits directors.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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