The Shanghai Automotive Industry Corp. (SAIC) has remained silent since MG Rover, Britain's last independent carmaker, started bankruptcy proceedings last week.
A company spokesman said on Sunday that SAIC may soon announce its decision on whether to continue talks with MG Rover on the proposed auto manufacturing joint venture, but no definite information is available yet.
Industry analysts in Shanghai say that SAIC has learned that MG Rover's financial situation is worse than it expected and fears that Phoenix Venture Holdings, the company that controls the British car manufacturer, risks also declaring bankruptcy within two years.
That would put SAIC under a heavy financial burden, they say, as it would have to repay MG Rover's 427 million pounds in interest-free loans to BMW, its former owner.
The analysts say that SAIC will proceed with the talks only if it is certain that Phoenix will not go under before Rover's new car is rolled out in 2007. Many believe the talks will end with MG Rover's bankruptcy.
MG Rover has been unable to make a profit since it was sold in 2000 by BMW to local managers in the British Midlands for a token 10 pounds (US$18.83). The German automaker had also recorded losses trying to turn the company around.
The British government has been trying to help the 100-year-old company reach an agreement with SAIC before the general election in May to prevent it from collapsing, which would mean the loss of several thousand jobs.
MG Rover and SAIC have been in talks for six months about creating a joint venture that would give SAIC a foothold in Europe and rejuvenate Rover's model range, but the deal appears to have stalled.
On Thursday, MG Rover said it had suspended production at its Longbridge plant in Birmingham, and called on the government to firm up its offer of a 100 million pound (US$188.3 million) bridge loan to keep the company solvent and revive the proposed deal.
(Xinhua News Agency April 11, 2005)
