MG Rover dismisses any talk of being shanghaied

The Guardian
Mark Milner and Jonathan Watts in Beijing

MG Rover yesterday played down reports that China's most powerful home grown carmaker, Shanghai Automotive Industry Corporation, was planning to take over the British group. Chairman John Towers said such interest would be "flattering" but that ongoing talks had included no discussion of SAIC buying either an equity stake or the whole company.

In June SAIC and MG Rover announced they were in negotiation to form a "far reaching strategic cooperation", covering funding for new models and opening up global markets, including China, to the MG and Rover brands.

Yesterday the weekly trade magazine Automotive News reported that the Chinese would initially take an equity stake in the British carmaker as a prelude to a full-scale acquisition in the long term. SAIC, which has 30% of its domestic market but is little known outside China, has targeted the world number six slot by 2020.

Foreign acquisitions appear to be seen as a short cut. Two years ago it bought just over 10% of the South Korean carmaker Daewoo and is now in the process of buying a controlling £272m interest in Ssangyong Motor, South Korea's fourth largest carmaker.

This is expected to be only the start of the buying spree. Last month it was reported that SAIC was planning a £600m share flotation on the Hong Kong Stock Exchange to build up its expansion fund.

However, MG Rover does not see itself as part of a SAIC shopping list. Mr Towers said: "We are in major collaboration with Shanghai Auto but I have to say that within these dis cussions there has been absolutely no discussion at all about an equity stake or an acquisition of the business."

Industry analysts believe that while MG Rover's research and development resources make it a desirable partner, the benefits can be achieved without any need for equity stakes. "The Chinese want to acquire the technology, MG Rover has a very large product development capability and is offering free access," said Professor Garel Rhys, director for automotive industry research at Cardiff University Business School.

"I don't think the question of an equity stake is entirely relevant. You have many joint ventures in the world motor industry and very few are backed up by equity stakes. The main thing is the technical relationship."