Cash-strapped car manufacturer MG Rover Group is going into financial administration after a proposed takeover deal with a Chinese firm fell through, the UK government said.
"MG Rover has announced that their board has decided to call in the receivers," Trade and Industry Secretary Patricia Hewitt said on Thursday night.
Some confusion surrounded the company's status yesterday.
Rover said only that it had asked PriceWaterhouseCoopers to "accept engagement to advise the board of directors on the current position at the company."
"This is a terrible day for the workforce of MG Rover and their families and for their suppliers," Hewitt told British Broadcasting Corp radio yesterday.
On Thursday, Rover -- the last major British-owned carmaker -- suspended production at its UK factory and called on the government to firm up its offer of a ?100 million (US$188 million) bridging loan to keep the company solvent and assist the proposed deal with Shanghai Automotive Industrial Co (SAIC).
Hewitt said the government had been eager to help, but with the deal collapsed, the loan was off the table.
"Once there was no prospect of a deal there was of course no possibility of a bridging loan," she told the BBC.
MG Rover executives and UK government officials had been in China holding emergency talks with SAIC. Reports had suggested that the deal, announced in November by MG Rover, was close to collapsing because of Chinese concerns about the UK-based manufacturer's perilous financial situation.
Hewitt said at the news conference that the Chinese firm had "made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal."
SAIC said MG Rover had failed to meet the requirement that it "was demonstrated to be solvent at the point of signing a deal and for two years thereafter."
However, a senior official at China's national planning agency said yesterday that SAIC was still in takeover talks with Rover.
"The firms' talks are still ongoing," Chen Bin, deputy director of the Industry Department of the National Development and Reform Commission, told Dow Jones Newswires in Beijing.
Hewitt planned to go to the Rover plant in Longbridge, near Birmingham, central England, yesterday to meet with workers, many of whom said they feared for their jobs.
"We thought the Chinese deal was going ahead, but it's collapsed," said assembly worker Donald Davies, 61, who has been at the plant for 15 years. "I think they will be telling us we won't be returning to work."
MG Rover's situation had looked dire for most of Thursday. The company said no cars were being built at Longbridge plant because of component supply problems.
Peter Beale, vice chairman of Phoenix Venture Holdings (PVH), MG Rover's parent company, said before Hewitt's announcement that speculation about Rover's ability to survive "has affected the confidence of our suppliers and dealers and time is clearly running out."
Beale had pushed for the government loan to be provided immediately to give MG Rover more time to complete the deal with SAIC.
"The PVH directors will provide ?10 million of personal money to convince the government of our commitment. What we need now is the government to decide," he said.
The troubles at MG Rover -- an industry stalwart that employs more than 6,000 Britons -- come at a sensitive time for the government, with a general election just four weeks away.
Hewitt said the government would work with unions and Rover's administrators to try to secure future car production at the 100-year-old Longbridge plant.
She said the government would immediately offer ?40 million in support for companies that supplied Rover.
SAIC's acquisition of MG Rover would have required approval from the Shanghai city government, SAIC's controlling shareholder, and the National Development and Reform Commission, a Cabinet-level agency in charge of economic policy.
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