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21 March, 2002


MG Rover Group Limited (MG Rover) and China Brilliance Industrial Holdings (CBIH) have entered into a long-term strategic Alliance and co-operation agreement to finance, develop, manufacture and market world-class automobiles for the mutual benefit of both partners.

The alliance provides the potential for MG Rover derived cars to be manufactured in China, including those that will be jointly developed. This will include the new medium-sized car, for which the styling direction was previewed at the Geneva Motor Show. Plans have also been put into place for the joint development of a new small car and consideration will be given to the development of additional new models. Equally the opportunity also exists for MG Rover to manufacture and market CBIH derived vehicles.

The companies will co-operate on the supply and manufacture of engines and development of a new range of engines.

MG Rover will provide considerable technical support and assistance in order to establish the necessary manufacturing processes and systems in China. This will extend to the establishment of a joint Research and Development centre in China.

The alliance will seek significant cost benefit from larger manufacturing volumes, going forward. A joint component sourcing strategy committee will be established in order to maximise the economic benefit of the companies' combined purchasing.

The alliance will enable both partners to grow more quickly, than would otherwise be possible because they will benefit from each other's strengths. It has been structured in a way that MG Rover and CBIH both benefit financially from combined alliance sales.

Kevin Howe, MG Rover, Chief Executive said: "This is a wide-ranging global alliance that spans the full breadth of both company's activities, and presents many opportunities. I am delighted that we have so much in common. Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does. It is clearly the leading automotive manufacturer, in the world's fastest growing car market.

"China will be one of the most important markets for the alliance. It is the world's fastest growing market for cars. The alliance can move quickly into a position where it can fully exploit this market's potential."

Dr. Brian X. Sun, Chief Executive, CBIH said: "From the beginning it was very clear Brilliance and MG Rover have a similar philosophy and operating style. We are both ambitious, clear in our vision and quick with decision-making.

"Equally important is the fact that MG Rover and CBIH do not have products that compete directly, which means we can take the full benefit from our alliance, without our plans conflicting in any way.

"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, which will in turn make our products more competitive.
Together we will be a force to be respected in the automotive industry."

The alliance creates the potential for much greater global reach and scale. Market territories have been assigned to each partner. Vehicles can be manufactured and sold exclusively by CBIH in China, and the majority of Asia and Africa. MG Rover will have exclusivity in all other markets, however consideration will be given to combining efforts in the USA.

A new joint venture company will be created. Ownership of the company will be shared 50/50 between MG Rover and CBIH. Three directors from MG Rover and CBIH will form the board. They will oversee the collaboration and manage alliance objectives. There will be no exchange of equity between MG Rover and CBIH, however both parties will invest substantial resources into ensuring the success of the alliance.

Discussions between MG Rover and CBIH began in the second half of 2001. In December a statement was issued outlining the scope of the proposed Alliance. Today, both MG Rover and China Brilliance are very pleased to announce that agreement has been reached.


About China Brilliance Industrial Holdings.
The Chairman of China Brilliance Industrial Holdings, Dr. Yang Rong, heads a group that comprises of eight Chinese companies, with listings in New York, Hong Kong and Shanghai.

The principle business of the group is vehicle, engine and component manufacturing and sales. It has an annual turnover in the region of $2.8 billion and significant global reach within the automotive industry, co operating with many of the world's most significant players including Toyota, General Motors, ***, London Taxi International, Mitsubishi and Renault.

The group employs 40,000 people, in seven fully integrated vehicle manufacturing facilities, three self-contained engine plants and in component manufacturing, in China.

Annual production for 2002 will approach 150,000 units. The group's products include minibuses, sedans, SUV's and pick-ups, light trucks and the legendary London black cab.

The group has some notable firsts. Brilliance China Automotive Holdings was the first ever Chinese company to be listed in an overseas stock exchange. Jinbei Passenger Vehicle Manufacture Co Ltd, is China's largest minibus producer.

The group's three engine manufacturing companies comprise China's largest producer of engines for light-duty vehicles.

Although the focus of the business has been on minibus production and sales, based on a version of the Toyota Hiace, it is intent on expanding into the growing sedan segment in China. The company will launch its Zhonghua sedan in the second half of 2002. It is the first vehicle to be designed and developed entirely by a Chinese automotive company. The group is also developing an MPV.

The group now employs more 3000 engineers.

It is also developing a family of advanced engines with FEV, in Germany. They will be manufactured in China, in brand new state of the art facilities, in volumes approaching 500,000 units for the group's vehicles and sale to other manufacturers.

The group's total investment to date, in vehicle and engine design and manufacturing exceeds $2 billion.

About MG Rover
The structure of MG Rover, an independent, medium-sized British company, reflects a corporate focus on the development of a fully integrated automotive business. Its aim is to create great cars, from great brands.

The company was formed following the purchase of the Rover Group from *** in May 2000. The total group has an annual turnover in the region of £2 billion and employs 6500 highly skilled and dedicated people.

The largest business within MG Rover is MG Rover Group, which designs, develops and manufactures cars at its Longbridge, Birmingham site in the UK. Its products are sold world-wide in 70 markets, with approximately 50 per cent of sales in export territories.

In Powertrain Ltd, MG Rover Holdings has a business that manufactures engines and gearboxes, from the same Longbridge site. MG Rover Parts Ltd will provide a world-wide after sales supply operation to the MG Rover dealer organisation.

MG Rover Holdings also includes MG Sport and Racing Ltd, MG Rover Property Ltd and MG Heritage Ltd.

From Reuters

MG drives into Chinese market

By Reuters
March 21, 2002

LONDON -- MG Rover announced a strategic partnership with China Brilliance Industrial Holdings on Thursday, as the loss-making British car maker continues its bid to return to its former glory.

Britain's main trade union for the car industry, the T&G, said the deal would secure "tens of thousands of jobs" at MG Rover, whose future was thrown into doubt two years ago when it was sold by Germany's *** for a nominal sum of just 10 pounds.

"China will be one of the most important markets for the alliance. It is the world's fastest growing market for cars. The alliance can move quickly into a position where it can fully exploit this market's potential," MG Rover Chief Executive Kevin Howe said in a statement.

The deal will see each company take a 50 percent stake in a new joint venture firm. The new unit will look to finance, develop and market new automobiles. There will be no exchange of equity between MG Rover and China Brilliance.

Copyright 2002 Reuters Limited. Click HERE for restrictions

The Full A.P. Version

The Full AP Story as it was on the NewsWire Service:

Copyright 2002 Associated Press
AP Worldstream

March 21, 2002 Thursday 1:58 PM Eastern Time


DISTRIBUTION: Europe; Britian; Scandinavia; Middle East; Africa; India; Asia; England

LENGTH: 746 words

HEADLINE: MG Rover strikes deal with Chinese partner to make cars in China



MG Rover Group Ltd. has formed a joint venture to build cars in China, barely two years after losing so much money that its previous owner, Germany's ***, gave it away.

MG Rover and strategic partner China Brilliance Industrial Holdings said Thursday they have agreed to take equal shares in the venture, which will finance, develop, manufacture and export a new medium-sized car and, later, a smaller model.

The deal to manufacturer cars for worldwide export is a major step forward for MG Rover, sold by *** in 2000 for a token 10 pounds (dlrs 14).

It provided welcome good news for the British auto industry on the same day that General Motors Corp. stopped producing Vauxhall cars at a factory in Luton, north of London, where 1,900 jobs have become casualties of restructuring and the strength of the British currency. Rover had been looking for a partner that could help it compete against much larger rivals. China Brilliance has cooperated with several other carmakers - including General Motors Corp., Renault SA and Toyota Motors Corp. - and generates annual sales of about dlrs 2.8 billion.

MG Rover is Britain's last independent manufacturer of cars for the mass market. Known until 2000 as Rover, it proved a sinkhole for dlrs 4.1 billion in investment by ***, which unloaded it that May to a group of British businessmen.

MG Rover has since narrowed its losses and expects to break even next year. Its annual sales are about 2 billion pounds (dlrs 2.8 billion).

Both MG Rover and China Brilliance said their alliance creates the scope for a greater global reach and scale of production.

"We have so much in common," MG Rover chief executive Kevin Howe said. "Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does. It is clearly the leading automotive manufacturer, in the world's fastest growing car market."

Howe's counterpart at CBIH, Brian X. Sun, said the companies shared a similar philosophy, ambition and operating style. By combining their resources, they'd be able to increase their purchasing power for components and cut the costs of developing new models by spreading them across bigger volumes.

"Together we will be a force to be respected in the automotive industry," Sun said.

Cardiff University Business School professor Garel Rhys sounded similarly optimistic.

"If what they say here is actually put into place, it's very good news indeed," said Rhys, director of Cardiff's center for automotive industry research.

"This probably is about the most thoroughgoing joint venture that the motor industry has seen ... In effect, it's a functional merger."

For MG Rover, the venture represents the next stage of its effort to creep back from the brink of collapse.

"It means you now have a credible product lineup and long-term strategy," Rhys said.

CBIH currently focuses on producing a minivan based on the Toyota Hiace but aims to expand into making sedans for the Chinese market. It also is developing a new line of engines together with FEV of Germany, a project that Rhys said could save MG Rover a lot of money.

Talks aimed at a joint venture began last year, defying expectations of many auto analysts that MG Rover would have to accept a fate as the junior member of a partnership with an industry heavyweight.

Under their agreement, CBIH would export jointly produced vehicles to most of Asia and Africa, while MG Rover would have rights to sell in the rest of the world. The partners said they would consider sharing the U.S. market.

Several Europe-based car companies have been concerned about reducing costly excess production capacity. On Thursday, a silver V6 Vectra became the final car to roll off the production line at the Vauxhall Motors Ltd. plant in Luton. The last few hundred workers were sent home, many of them furious at losing long-term jobs.

Vauxhall, the British subsidiary of General Motors, announced the closure at the end of 2000.

MG Rover, however, is positioning itself to boost capacity by taking a stake in the underdeveloped Chinese market.

Rhys argued that MG Rover was unlikely to shift production to China from its plant at Longbridge near Birmingham, central England, just to take advantage of China's lower production costs. Output at Longbridge, currently at more than 150,000 vehicles a year, could even increase if overseas sales grow as the two partners predict.

LOAD-DATE: March 21, 2002

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As a slight aside to this story, Scott Swift writes in autocar that the zhonghua brilliance is tipped to arrive in the UK later this year in-side a MG Rover lorry and should do so by cover of darkness :D
and he says"ive been behind the wheel of an ZT190. this really is a good car.MG deserves to do certainly works hard :its sales and marketing staff can often be found slaving away at longbridge long after the motor industry support staff's knocking off time of 3pm fridays.
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