MG Rover tells BMW it wants more

MG Rover, the car manufacturer, last night said it was seeking more cash to boost profitability and separately was hoping to squeeze more money out of its former German owner, BMW.

The British company, which lost £720m last year and saw its market share shrink, explained that it would be asking external financiers to help with dealer retail finance and finished vehicle inventories.

MG Rover said these new arrangements were in line with what other manufacturers were doing and should not be interpreted as the company being short of cash or struggling.

"We are cash rich with this debt-free business and will sell 200,000 cars this year which is very much in line with all our our targets," said spokesman Gordon Poynter.

He denied reports that MG Rover was seeking an extra £150m from BMW to secure the long-term future of the group as a mass-market carmaker. But he admitted there was a discussion with BMW over the value of the assets it had bought and that this could involve more money being handed over.

The German company sold Rover in May for a symbolic £10 and gave the purchaser, Phoenix consortium, an undisclosed dowry estimated to be worth between £450m and £575m. This was in part to cover 1,000 redundancies and the cost of relocating the Rover 75 from Cowley, where BMW will produce the new Mini, to Longbridge.

Now there is speculation that issues such as government actions to reduce the price of cars in Britain has affected the value of thousands of unsold cars in MG Rover's possession.

The German carmaker confirmed that it might have to make an additional payment to its former subsidiary if it was decided that the British carmaker's assets were worth less than originally thought.

BMW spokesman Richard Gaul said his company was having a detailed valuation of Rover carried out by accountancy firm KPMG.

The due-diligence review was likely to last until late autumn but the company had already made provisions for the eventuality of an additional payment to Phoenix.

"I don't think we'll have differences at the end," Mr Gaul said pointing out the two sides had agreed to call in a neutral arbiter should they fail to come to an agreement.

The MG Rover spokesman said adjustments might be needed to May valuations but added: "It could go either way. It is a matter of commercial confidentiality."

MG Rover says it is well advanced in its plans to start producing a Rover 75 estate car and three new MG models.

Meanwhile Ford is reported to be ready to inject £150m in a radical overhaul of Land Rover which would see production increased by 60% to 275,000 vehicles a year.

The money would be used to modernise its Solihull base and to create a new Range Rover model costing upwards of £80,000. A V6 version of the Freelander will be sold in the US and Japan.