2 February 2005

MG Rover says its life-saving tie-up with Shanghai Automotive Industry Corporation (SAIC) is on track, despite frenzied media reports that the British Government is increasingly nervous that a deal could collapse in the run-up to the general elections. Autocar understands that face-to-face SAIC-MGR negotiations took place at Longbridge in January.

Newspaper reports claimed the British Government was offering a multi-million pound ‘dowry’ to SAIC. MGR described the stories as ‘utter rubbish… the EU doesn’t allow state aid for car companies’.

But The Times newspaper claimed a further hurdle was placed in the way of a deal. An SAIC-commissioned study by consultants Ricardo had concluded that the 15-year-old Rover K-series engine could need significant re-engineering to extend its working life.

However, an MGR source said that the report was probably ‘wishful thinking’ as the engineering project to ready the K-series engine for Euro4 emissions regulations was virtually complete.

Meanwhile Fiat Auto could also be in the running for a tie-up with SAIC. In a little-noticed move, Fiat’s Iveco commercial vehicle division signed a long-term co-operation deal with SAIC in December.

Ideally placed for a sell-off is Fiat’s executive Lancia Thesis model (which shifted just 3000 units last year, pictured right), its defunct Alfa V6 engine and possibly even the rights to the name outside Europe. The sophisticated Thesis is the last model on that particular platform, so the whole production line could easily be transferred overseas.

However, one source told Autocar that SAIC’s Korean Ssangyong division is looking to build an executive model positioned under the Mercedes-derived Chairman saloon.

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Meanwhile, some reports say that Lancia – which sold just 115,000 cars last year – was provisionally axed late last year by Fiat Auto boss Herbert Demel. However, Fiat Group chief Sergio Marchionne announced at a recent briefing that he had commissioned Giorgetto Giugiaro to design a new Delta for 2007 as Lancia appears to shift towards smaller, more upmarket cars.

So, another new and radical deal for Fiat in China? Unlikely, but don’t rule it out. After all, Lancia faces issues that, strangely, parallel MG Rover’s.

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