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MGR dealerships to hang on

Most MG Rover retailers are likely to try to hang on until Nanjing Automobile resumes production next year rather than attempt to refranchise, says Richard Cort, chairman of its dealer council.

He estimates 170 to 180 of the 254 sales points operating when MG Rover collapsed in early April are still in business. “This week, I am hoping to have a formal meeting with Nanjing in London and will then brief the dealer council as soon as possible,” says Cort.

“I’m reasonably comfortable with the deal. I have spoken to Nanjing executives on behalf of the dealers and believe they are honourable people. They hope they can resume production in the UK by next May, with new product following in 2007.”

Nanjing, China’s oldest vehicle manufacturer, paid an undisclosed sum thought to be around £50-60m for the remaining assets of MG Rover and Powertrain, its engine division.

Its plans comprise mass assembly of MG-branded cars in China next year, and low-volume production of the MG TF roadster and ZT saloon at Longbridge or another West Midlands site, employing up to 2,000 people.

Shanghai Automotive (SAIC), in partnership with Nanjing when it broke off purchase talks with MGR shortly before it ceased trading, had hoped to buy Powertrain from the administrators, PricewaterhouseCoopers.

#AM_ART_SPLIT# In recent weeks it collaborated with Martin Leach, the former Ford Motor Group and Fiat Auto executive. It is now reportedly considering legal action to force PwC to reconsider.

Tony Lomas, joint administrator at PwC, says: “SAIC submitted a bid for all MG Rover and Powertrain assets but its level and conditions left Nanjing’s bid as the preferred way forward.”

David James, the corporate trouble shooter who led the Kimber Group’s £25m unsuccessful bid, had hoped to resurrect a British-owned MG Rover.

Nanjing, thought to be losing money in its home market, is approaching failed bidders to offer a stake in MGR. It wants additional funding in order to restart production at Longbridge.

PwC’s responsibility was to raise as much money as possible for MG Rover’ creditors, but the sale price probably represents only around 3.5p in the pound.

Nanjing now faces other challenges in addition to successfully transplanting production lines. SAIC has the rights to sell Rover 25 and 75 in China, and Honda owns the designs to the Rover 45.

Cort says: “I don’t see a problem over design rights as SAIC and Nanjing are, in effect, controlled by the Chinese government.”

His view is echoed by Professor Garel Rhys of Cardiff Business School. He believes Nanjing and SAIC will come to an agreement as both want a foothold in Europe’s car market, and that the remaining MG Rover dealers could be in a strong position if they hold out a little longer. “I wouldn’t be surprised if the operation restored in Longbridge by Nanjing could be making vehicles for SAIC too in the future,” he adds.

Rhys describes Nanjing’s purchase as a major boost for the UK. “We’ve had our first Chinese purchase of a company here. And for the first time, a Chinese-owned engineering operation will be based in the West. Britain is in pole position for Asian companies trying to build global networks.”

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