AM Online

MG Rover sells parts arm to fund new model build

MG Rover is selling off its replacement vehicle components arm to Caterpillar Logistics Services for more than £100m in order to free up cash for essential new model development.

The move comes just weeks after the loss-making car manufacturer announced the beginnings of a strategic alliance with China’s biggest automotive group, Shanghai Automotive Industry Corporation, which it hopes will bring it into profit.

Caterpillar Logistics Services, the supply services division of US-based Caterpillar Inc, has already been managing the parts business for MG Rover since 2001 from its facility in Desford, Leicestershire.

It says its operation will continue as normal, with all 390 employees being retained, and all staff at MG Rover’s parts business will be given the opportunity to transfer to Caterpillar Logistics.

However MG Rover is retaining an option to buy back the business in four to five years, should it wish to.

Company spokesman Kevin Jones says the deal is vital to allow the manufacturer to raise funds to develop new models that will appeal to buyers in the future. He adds: “It’s not to do with profitability, it’s about mobilising resources to suit us as a business.”

The agreement is expected to be finalised within weeks once it has received regulatory approval. The company plays down reports in the Birmingham Evening Mail that it has had to increase production to meet bulging order books following the British International Motor Show. The newspaper claims that MG Rover staff are working overtime for the first time in years in order to meet demand.

Jones says some extra shifts have been introduced, but this was necessary to increase the company’s stock of the recently refreshed Rover 25 and 45 and MG ZR and ZS models in preparation for an anticipated boost in sales with the new registration plate in September. “We certainly would expect to sell more of the new models but we don’t want to put predictions in place that we cannot realise,” he says.

The Longbridge plant is also increasing production to offset its two-week annual shut down at the end of the month.

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