15 July 2004

MG Rover has struck a deal to sell off its lucrative parts division - raising £100 million to invest in urgently needed new models to replace its ageing line-up. Longbridge has sold its Xpart parts business to Caterpillar Logistics Services for a sum ‘in excess of £100m’. The news means that MG Rover will no longer directly control its spare parts business, but both firms will share the profits.

Caterpillar will manage the sourcing, marketing, distribution and sales of all spares for the 2.5 million cars currently on the road, including cars built during the Austin Rover, British Leyland and other eras.

Parts businesses can be very profitable in the automotive industry, especially with such a large back catalogue as MG Rover’s. The Xpart deal also includes parts for future models.

Parts supplies are not expected to be disrupted, as Caterpillar has run MG Rover’s parts business for the past three years. MGR has the option to buy back the business in five years.

Kevin Howe, chief executive of MG Rover parent company Phoenix Venture Holdings, said: ‘This deal provides valuable resources which will be invested in our core business.’

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The £100m will be used to fund new models to replace the 25 and 45 - with its new Chinese joint venture partner, SAIC.

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