The SAIC-MG Rover deal could be in trouble. The Chinese government may kill it by not approving Shanghai Automotive Industry Corp.’s effective takeover of MG Rover.
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According to Automotive News Europe, SAIC is also irritated about extensive UK press reports citing MG Rover sources that SAIC is investing £1 billion (€1.4 billion) and has already paid £40 million to buy MG Rover technology.
SAIC insists the agreement has not been finalised and that no money has changed hands yet.
“There is no agreement as regard to the form, the stakes, the shareholding structure or the timing of the signing,” said SAIC spokesman Xue Hao. He said SAIC had only signed a memorandum of understanding in June that MG Rover will be an exclusive partner in China.
A source close to the negotiations agreed discussions are continuing. “The parties have some preliminary understanding, but so many things can change,” he said.
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By GlobalDataMG Rover has a poor record on links with foreign partners. Previous technology agreements with Chinese automaker China Brilliance and Malaysian-based Proton fizzled. MG Rover and Indian automaker Tata are arguing over disappointing European sales of the Tata-built CityRover and analysts say the relationship may not survive.
The pending China agreement would give SAIC effective control of the troubled British automaker by creating a Shanghai-based joint venture 70% owned by SAIC. SAIC would contribute cash and management. MG Rover would apparently contribute its Longbridge, UK, assembly plant; 1,250-dealer distribution network; existing three-platform car lineup; and technology including work on successor models.
The two partners would each build the new cars. SAIC would produce cars in China for the local market. MG Rover would build the new models at Longbridge for the European and possibly US markets.
The key is Chinese government approval. SAIC can’t give MG Rover money for anything without the government’s approval. SAIC is owned by the Shanghai government and is therefore a state-owned asset. But approval for such a large investment must come from the National Development and Reform Commission in Beijing.
But Chinese approval may be long in coming because Beijing is uneasy about the deal, sources say. The commission is concerned about UK labour laws and that MG Rover’s technology is outdated by western standards.
