With its negotiations with Shanghai Automotive Industry Corp at a critical stage, cash-strapped MG Rover suspended production at its Longbridge plant on Thursday afternoon.
With its negotiations with Shanghai Automotive Industry Corp (SAIC) at a critical stage, cash-strapped MG Rover suspended production at its Longbridge plant on Thursday afternoon.
Suppliers of components to the plant are believed to have stopped supplying the company because of the uncertainty surrounding it's future. The break in production, reportedly caused by the shortage of parts, comes as the manufacturer is locked in negotiations with SAIC in a bid to save the firm and 6 000 jobs.
If talks fail MG Rover risks being forced into administration. "Given the amount of negative media coverage this week, it is no surprise that we have suffered a few isolated component supply problems", MG Rover said in a statement. "For this reason, we have temporarily suspended production".
No staff have been sent home as a result of the move which has stopped production of cars including the Rover 25, 45 and 75 models and MG sports cars, the company added.
Many companies in West Midlands depend on supplying MG Rover - Britain's last surviving mass producer of new cars. Suppliers have said they will not resume business until there was confirmation of a R1,2 billion bridging loan from the British government.
Pressure has been mounting on the British Trade Secretary Patricia Hewitt to grant the loan, which would pay the way for a joint venture between MG Rover and SAIC.
"The Prime Minister, the Chancellor, other ministers and I are doing everything possible to bring this to a successful conclusion and that remains the case," Ms Hewitt told MPs earlier.
"A bridging loan has been offered in order to provide a bridge to a commercial deal and that remains the case but commercial discussions are taking place and I'm afraid that at this point there is nothing more I can say publicly," she said.
Talks concerning the loan are continuing, but sticking points have arisen over the terms of the agreement. SAIC wants the loan to run for at least two years - which is when the joint group could start making money.
However, that could prove difficult as European Union rules on state aid restrict funding to a six month period.
Original article from Car