MG Rover expects to breakeven next year, despite having reported a loss of £254m on turnover of £961m in the last eight months of 2000 following its sale by BMW.

The result compares favourably with 1999 when, under BMW ownership, the carmaker's deficit was £780m.

Kevin Howe, MG Rover chief executive, said that losses for 2001 would be considerably below last year.

The accounts show that MG Rover has net cash of £329m, which includes the first £200m of a £500m interest-free loan promised by BMW.

Mr Howe confirmed the Italian carmaker Qvale, which the group acquired in June, would produce the flagship X80 MG coupe and roadster models in 2002.

He said more component suppliers would be brought on to the 430-acre Longbridge factory site to form a “unified centre of excellence” with lower costs and shorter supply lines. Meanwhile, Land Rover has extended its engine and transmission contract with MG Rover's Powertrain subsidiary until 2005.