(Fri 28 Dec 07)

Intriguing news from China, where two of the companies involved in the death and rebirth of the old MG Rover company have signed a co-operation agreement.

The companies in question are the Shanghai Automotive Industry Corporation (SAIC) and Yuejin Motor, parent company of Nanjing Automobile Corporation. Early in 2005 there was talk of SAIC entering into a joint venture with Phoenix Venture Holdings, and it was the failure of this deal to take place that led to MG Rover being put into administration.

In July that year, administrators PricewaterhouseCoopers accepted a bid from Nanjing (a smaller but older company than SAIC) to take on the company, despite a late and very low bid from the UK-based Project Kimber organisation.

SAIC had also applied to take on MG Rover's assets after the adminstrators had been brought in, a move described by one enthusiast group as "grave robbery". There was further complication when SAIC said it owned the intellectual property rights to various parts of MG Rover including several of the company's engines, while Powertrain - which had the facilities to build those engines - was now in the hands of Nanjing.

Yet another point to consider was the fact that SAIC had tried to buy Nanjing in 2001 to gain new manufacturing capacity. The government of Jiangsu Province, a part-owner of Nanjing, didn't want to sell, and Nanjing instead became a more serious competitor to SAIC after attracting new investment.

The late-2007 situation is entirely different. After five months of what has been descibed as "delicate planning", the co-operation agreement is now in place, and as a result of it Nanjing's entire automotive business is to be "fully integrated" into SAIC. MG's complete vehicle and first-tied parts business will be looked after by SAIC Motor, while components, service and trading business will be the reponsibility of a new joint-venture organisation known as Donghua Company.

The deal means more investment in the UK factory at Longbridge, where the co-operation "will strengthen the functions of R&D, sales and marketing and manufacturing". SAIC needs a greater involvement in the UK industry "to enhance its multinational operations competence".