MG Rover suspends production

Thursday, 7 April 2005 12:00 AM

MG Rover has suspended production blaming component supply problems after a week of negative press.

Production at MG Rover's Longbridge plant in the West Midlands ground to a halt at lunchtime on Thursday as MG Rover bosses and Department of Trade and Industry officials continued attempts to secure a bail-out deal with the Shanghai Automotive Industries Corporation (SAIC) in China.

Difficulties with component suppliers were cited as the reason behind what the company has reassured is a temporary suspension, and the group has blamed negative press coverage this week for creating doubt about the company's future.

"Given the amount of negative media coverage this week it is no surprise that we have suffered a few isolated component supply problems," the group said in a statement.

"For this reason we have temporarily suspended production."

Doubts over MG Rover's solvency are thought to have pushed suppliers into withholding their products after it was reported that SAIC received a confidential report from accountancy firm Ernst & Young indicating that MG Rover's parent company Phoenix Venture Holdings was under threat of insolvency.

It is believed that this latest development will seriously hamper MG Rover's chances of securing a £200 million deal with SAIC plus a £100 million bridging loan from the government.

Although MG Rover appears confident that production will be able to resume, it is feared that could the SAIC deal not go ahead, the company will go into administration.

Over 6,000 jobs at the Longbridge plant could go plus the plant's closure will also have damaging consequences for many other engineering companies in the West Midlands that rely on MG Rover's presence there.

Workers at the plant are currently "keeping busy", the company stated, despite production on the Rover 25,45, 75 and the MG sports cars having ceased.

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