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Mixed emotions for car industry: Rover signs China deal which could be life-saving on day that Vauxhall ends Luton production

Terry Macalister. The Guardian - United Kingdom; Mar 22, 2002

The contrasting fortunes of the British car industry were on view yesterday with MG Rover signing what could be a life-saving deal with China on the same day as Vauxhall shut its Luton plant.

Loss-making MG - the only truly British-owned volume carmaker - has formed an alliance with China Brilliance which paves the way for new models and export markets while potentially safeguarding thousands of jobs.

MG and China Brilliance are to establish a new 50-50 owned joint venture for the development of a new generation of small and medium-sized vehicles to be built at the Longbridge plant in Birmingham and in the Far East to replace the Rover 45 and Rover 25. New components could be sourced in China and other low-cost countries.

China Brilliance is virtually unknown in Britain but is quoted in New York and produces around 150,000 mini-buses a year under an agreement with Toyota as well as having a licence to make ***'s 5 series.

"This is a wide-ranging global alliance that spans the full breadth of both company's activities and presents many opportunities . . . Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does," said Kevin Howe, MG's chief executive.

"Benefit will be derived from large economies of scale, which will spread development costs for new products over bigger volumes and increase purchasing power for components," said Brian X. Sun, Brillance's chief executive.

Industry watchers and trade union leaders hailed the deal as one which could offer MG the partner it needs to ensure its long-term survival.

Professor Garel Rhys, director of the centre for automotive research at Cardiff Business School, said: "This puts MG on a firm footing and allows it to introduce a new and wide range of vehicles that might not have been possible without it. It also offers MG a partner who will not dominate it, at least in the short term."

Sir Ken Jackson, general secretary of Amicus, described the deal as "great news" but Tony Woodley, chief car negotiator for the Transport & General Workers Union warned the future could still be uncertain: "Let's not kid ourselves. No one is bankrolling Longbridge."

Around 7,000 people still work at the Birmingham site where MG made 170,000 cars last year including the UK's best selling sports car.
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