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Time running out for U.K.'s last automaker

MG Rover was forced to suspend production on Thursday as suppliers suspended deliveries amid growing nerves about a government delay in providing a loan essential for a deal to save Britain’s last major carmaker.
/ Source: Reuters

MG Rover was forced to suspend production on Thursday as suppliers suspended deliveries amid growing nerves about a government delay in providing a loan essential for a deal to save Britain’s last major carmaker.

MG Rover said it had temporarily suspended production at its plant in central England, which employs 6,000 staff, after failure to make progress in talks to secure an alliance with China’s Shanghai Automotive Industry Corp.

“Given the amount of negative media reports this week it is no surprise that we have suffered a few isolated component supply problems,” a MG Rover spokesman said.

“For this reason we have temporarily suspended production.”

The spokesman said MG Rover hoped to have production back up “as soon as possible.”

British automotive engineering group Wagon Plc said on Thursday it was suspending supplies to MG Rover. “The board of Wagon Plc announces that, in view of MG Rover’s current inability to meet its payment obligations, it has decided to suspend supplies to MG Rover with immediate effect,” Wagon said in a statement.

MG Rover was still waiting for the U.K. government to decide whether it would grant a 100 million pound ($187.9 million) bridging loan crucial to securing a deal with SAIC, China’s largest carmaker.

Trade and Industry Secretary Patricia Hewitt said earlier Thursday everything was being done to secure a deal, reiterating comments made by Prime Minister Tony Blair a day earlier.

“The prime minister, the chancellor, other ministers and I are doing everything possible to bring this to a successful conclusion and that remains the case,” Hewitt told parliament, refusing to comment further.

Negotiations between the government, MG Rover’s owners and SAIC in Shanghai stalled on Wednesday amid reports MG Rover was close to running out of money.

SAIC is seeking guarantees that MG Rover’s holding company, Phoenix Venture Holdings, can keep the company solvent for the next two years. The government loan may help it achieve that.

MG Rover has denied reports it will run out of money by the end of this week.

MG Rover’s future and jobs at its Longbridge plant hinge on securing an alliance with SAIC to produce cars in Britain and China.

MG Rover, a former British icon dating back to 1905, was sold to Germany’s BMW AG in the 1990s before returning to British hands when it was sold to Phoenix four years ago.