LONDON - The future of MG Rover, Britain's last independent automaker, was in jeopardy Friday after the collapse of a tie-up deal with China's Shanghai Automotive Industrial Corporation (SAIC) forced it to begin bankruptcy proceedings.
The deal's failure signals the likely end of the automaker and loss of thousands of jobs, and comes at a politically sensitive time, only a day after the announcement of a general election in a month's time.
"Tonight MG Rover has announced that their board has decided to call in the receivers," Trade and Industry Secretary Patricia Hewitt said late Thursday in a terse statement at a press conference.
"Everyone recognized that a partnership with SAIC was critical to MGR's future," Hewitt said.
"In the end, SAIC made it clear that they were not confident about the future solvency of MG Rover, and therefore there was no reasonable prospect of a deal."
A source at the Chinese firm also said that sufficient British state funding for Rover had not been forthcoming so "there could be no deal".
Rover did not confirm it had called in administrators, but said in a statement that its board had asked accountants Price Waterhouse Coopers to "accept engagement to advise the board of directors on the current position at the company".
"This is a deeply worrying time for everyone and our thoughts are with them and their families," it said.
One board member told the BBC later that Hewitt had "jumped the gun" by declaring the receivership, and that only directors could decide on such a move. Hewitt's office responded that her statement was valid.
Rover's entry into receivership would mean that outside financial administrators would take control of the company and assess its assets and debts in advance of possible liquidation.
Earlier on Thursday the company halted production at its main factory site in Longbridge, in the central English city of Birmingham, where some 6,100 workers are employed.
The plant sits squarely in the West Midlands, an area marked by key marginal constituencies which will be fiercely fought over in the following weeks by Prime Minister Tony Blair's Labour Party and opposition rivals.
In a bid to avoid the job losses and save the deal, the government had stressed that its bridging loan of 100 million pounds (146 million euros, 188 million dollars) was still on the table.
But the Chinese company ultimately found the offer insufficient.
"The government stood ready to issue bridging finance of over 100 million pounds to help, but without a deal there was no possibility of a bridging loan, SAIC, for their part, indicating that bridging loan finance would not have solved their concerns," Hewitt said.
A spokesman for SAIC, quoted by Britain's Press Association newswire, said the company always made it clear that MG Rover would have to be solvent for at least two years for the partnership deal to go ahead.
Although he acknowledged that the British government had offered to provide interim grant aid, he said: "Such grant aid has not been forthcoming. SAIC can do nothing. There can be no deal."
MG Rover, which produced its first car in 1904, was bought by BMW in 1994, but the German carmaker pulled out in 2000, and it was saved from closure by a group of local businessmen, including its then-chief executive John Towers.
Tony Woodley, leader of the Transport and General Workers Union, said some blame for Rover's "deathknell" went to BMW for walking away from the company.
Hewitt said she, Blair and Chancellor of the Exchequer Gordon Brown had made concerted efforts to prop up the deal, offering tax deferrals to the company.
Woodley, who announced the collapse alongside Hewitt, said Blair had even made a 25-minute phone call Wednesday to a senior figure in the Chinese government -- reportedly President Hu Jintao -- in a bid to save the tie-up.
Opposition Conservatives and Liberal Democrats voiced distress over the news, with the Tories' industry spokesman Stephen O'Brien calling it on BBC television a "very deep and bitter tragedy" for the Longbridge workers.
Caroline Spelman, a Conservative lawmaker from the West Midlands, said it was a "bitter blow" for her constituency.

04/08/2005 01:30 GMT