A proposed joint venture between Shanghai Auto Industry Corp. (SAIC), one of China's top carmakers, and the troubled British car firm MG Rover would leave SAIC with a 70 percent share of the company.

Quoting unnamed industry sources, the South China Morning Post said the joint venture would have a production capacity of one million vehicles a year, made in both Shanghai and Rover's home base of Longbridge in Birmingham.

Under the proposed deal, SAIC would invest one billion pounds (US$1.85 billion) in Rover, a tie-up that could potentially rescue the fading fortunes of the Birmingham-based factory and its workers.

The two companies signed a cooperation agreement in June last year but the deal has run into difficulties with China's National Development and Reform Commission (NDRC).

The newspaper quoted sources on the mainland as saying that the Chinese Government was divided on the issue, with some officials seeing the deal as an opportunity for SAIC to acquire a famous brand, European technology and production processes.

SAIC currently manufactures cars and minivans in joint ventures with General Motors and Volkswage, but does not own the intellectual property rights to any of them, according to the report.

Other Chinese officials, however, argued that the price tag was too high for an unprofitable firm with just a 3 percent share of the British market, the report said.

In addition, Rover lacks strong research and development, and SAIC, China’s largest State-run automaker, is ill equipped to run such an operation.

The report also noted that SAIC might be fully occupied with running Sangyong Auto, the fourth-biggest car producer in South Korea, which it acquired last year.

A spokesman for the NDRC would not confirm whether the carmaker had sought formal approval for the joint venture.

(Shenzhen Daily February 21, 2005)