Shanghai Automotive Industry Corp. will pay about £200 million (E290 million) for MG Rover, says a UK source close to the deal.
The amount is far less than the £1 billion price originally discussed.
“That was a speculative figure,” said William Baldwin-Charles, MG Rover’s corporate affairs manager.
MG Rover and SAIC are forming a company that will be about 70 percent owned by the Chinese automaker and 30 percent by MG Rover.
The joint company will include MG Rover’s brand, intellectual property, r&d facilities, distribution system, and MG Rover’s plant in Longbridge, England, said Baldwin-Charles.
SAIC’s investment in MG Rover may increase in stages in the future, said a source in China familiar with the negotiations. Additional investments would require MG Rover to meet specific conditions.
One likely condition is for MG Rover to lay off some of its 6,100 workers, most of whom are unionized.
The main Amicus union has not been involved in the negotiations at any stage, said Tony Murphy, the union’s national officer for automotive. That reflected its fear of possibly derailing the talks, he said.
“If we start creating ripples too early, it might upset the Chinese. Without the deal, Rover will be gone by the end of the year,” said Murphy. “We’ll take what we can get and make the best of it.”
MG Rover and SAIC have submitted a feasibility study to China’s central government, which must approve the venture before it can be finalized.
SAIC and MG Rover both say they expect the deal to be closed fairly quickly. But a source in China familiar with the process said it would likely take months rather than weeks.
In addition, Chinese automaker Nanjing Automobile is negotiating with SAIC to buy 20 percent of the SAIC-MG Rover venture after the deal closes. Nanjing’s share would come out of SAIC’s 70 percent stake.
Nanjing Auto is a state-owned auto manufacturer that builds vans and sedans in China in joint ventures with Fiat group commercial vehicle maker Iveco and Fiat Auto.
Nanjing Auto and SAIC could not be reached for comment.
By allowing SAIC to essentially buy it, MG Rover would get badly needed cash to develop new models as well as access to Asian markets.
“The plan is very much for SAIC and MG Rover to work together on new models for the future for the world market,” said Baldwin-Charles. “We will make models in the UK and in China.” All will be made in both countries, he added.
Large supplier network
MG Rover also would be able to buy parts from SAIC’s supplier network in China. “Working with a company the size of SAIC will allow us to cut our costs in terms of sourcing,” Baldwin-Charles said.
SAIC manufactures Volkswagen- and General Motors-brand cars through joint ventures. It aims to make 50,000 self-branded cars annually by 2007.