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Rover deal threatens 2,000 jobs

MG Rover may have to lay off up to 2,000 workers at its Birmingham factory if China's largest automaker agrees to a buyout deal, the Financial Times reports.

The newspaper said Rover and Shanghai Automotive Industry Corp (SAIC) were discussing shifting production of the small Rover 25 model and some engines to China.

The report said the move could cost the jobs of up to one third of Rover's workforce of 6,100.

SAIC, China's largest carmaker, is also insisting all of its cash will be invested in a new venture company and that none will go to the four owners of Rover.

Sources on both sides of the deal rejected claims that SAIC could invest £1bn as being much too high, it said.

Instead, the agreement would see Rover take about 30% of a joint venture in China, with the remaining 70% split between SAIC and nearby Nanjing Automobile on an 80/20 basis.

Earlier this week, Chinese state press reported that Nanjing Auto Group, a small state-owned carmaker, had virtually agreed with SAIC to take a 20% stake in the British firm.

The new company would see Nanjing, which already has a venture with Italy's Fiat, take up production of Rover's 45 series, while SAIC would take on Rover's 25 series.

In Britain, most of the Longbridge production would be put into a joint venture in which the Chinese would have control, the Financial Times said.

On a visit to China this week, Chancellor minister Gordon Brown said a deal for SAIC to buy a majority stake in Rover was days away from completion.

He said the Government was willing to sweeten the deal with tax breaks for the British firm.

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