Government loan for MG Rover

Troubled car manufacturer MG Rover has received a government loan to help sustain the business while administrators PricewaterhouseCoopers (PwC) continue to work on reopening talks to save the firm.

Trade and Industry Secretary Patricia Hewitt announced a £6.5 million loan for the company, which went into administration on Friday following the collapse of a possible deal with Chinese carmakers, the Shanghai Automotive Industry Corp (SAIC).

The loan will enable MG Rover to stay in business for another week and keep nearly 6,000 employees in their jobs while the administrators work on establishing a possible deal with SAIC.

Ian Powell, a partner in PwC, said that they were "pleased" to have received the government funding, saying that it had provided "vital breathing space to evaluate the interest of all parties." However, he stressed that it was only "a small step forward".

PwC partner Tony Lomas said: "There is a possibility that our appointment as administrators creates an opportunity to resolve some of the concerns around the previous deal and we now seek to engage in discussions with SAIC as soon as possible."

However, it has been reported that SAIC are unlikely to consider a joint venture with MG Rover while the company is in administration.

PwC confirmed that the car manufacturer, along with its subsidiary, engine and gearbox manufacturer Powertrain, are incurring "very significant losses" –estimated to be between £20 and £25 million per month.

The administrators said that the majority of the workforce had been sent home with full pay, although a small number of employees remained at the Longbridge site in order to help with the administration.

Car production at the site had already ceased when PwC assumed control of MG Rover's affairs on Friday and the administrators said that there were "no plans" to resume car production, although it is expected that limited engine production will continue at Powertrain.

Conservative leader Michael Howard has criticised the government for reacting "too slowly" to the crisis. He said yesterday: "I believe that the government have got involved in this situation at far too late a stage. Government must have known what was going on a year ago and they seem to have been very slow and very late into the business of seeing what they could to do help."

Liberal Democrat trade and industry spokesperson Malcolm Bruce also said that the bridging loan came "too late" for MG Rover. Mr Bruce said: "If the government had really been serious about saving Rover it would have got involved five years ago rather than trying to play the knight in shining armour when it was already too late."

(KmcA)