U.K. government
floats loan to MG Rover

updated 5:11 p.m. ET April 10, 2005

LONDON - The British government Sunday announced an $11.7 million loan to keep the troubled U.K. automaker MG Rover afloat while the company tries to revive a crucial deal with a Chinese car maker.

MG Rover filed for a form of bankruptcy protection Friday after the Shanghai Automotive Industry Co., or SAIC, pulled out of talks about its planned takeover of the last major British-owned car manufacturer.

That threatened the future of MG Rover, which employs 6,000 people at its main plant at Longbridge in Birmingham, central England.

Trade and Industry Secretary Patricia Hewitt said Sunday the loan will pay wages and expenses for a week while officials try to persuade SAIC to reconsider.

She said the government had agreed to the funds “in order to avoid the issuing of redundancy notices at MG Rover while efforts are made to keep the business together.”

Administrators, government officials, company managers and union leaders spent the weekend in crisis talks in an attempt to revive the proposed partnership between MG Rover and SAIC.

In statement issued jointly with the Transport and General Workers’ Union, and the union Amicus, Hewitt said the government “has agreed to assist and work with the administrator and with the unions who will be developing, with all reasonable speed, a realistic business proposition for SAIC and other possible purchasers to consider.

“We will monitor the situation closely and review the adequacy of funds available while there is a realistic prospect of re-engagement with SAIC.”

PricewaterhouseCoopers LLP was appointed administrator of MG Rover after the Chinese company, concerned about the extent of the financial problems it had recently discovered at the British company, pulled out of emergency talks in China about its planned takeover.

PWC is examining MG Rovers’ books, including reports of a $750 million “black hole” in the pension plan, to discover whether the iconic company can be salvaged or whether it will be broken up and sold off to repay creditors.

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