MG Rover's loss-making Longbridge plant suspended production at lunchtime today, with the management blaming problems with component supplies and the past week's negative media coverage of the company.

Cash-strapped MG Rover is attempting to negotiate a £1 billion takeover deal with the Shanghai Automative Industries Corporation, of China, and a £100 million bridging loan from the UK Government. But this latest development may wreck any survival plan hopes and could see the 100-year-old company forced into administration, with the loss of nearly 10,000 jobs and damaging consequences to many other businesses throughout the Midlands.

MG Rover said that the halt to the day shift's production lines at Longbridge, in Birmingham, was only a temporary measure. "Given the amount of negative media coverage this week it is no surprise that we have suffered a few isolated component supply problems.

"For this reason we have temporarily suspended production."

It is believed that some component suppliers have withheld their products because of the uncertainty over the company's future.

One senior union official with members at the plant said: "The problem is that some in the supply chain are panicking and this is having an effect on the delivery of parts. We would urge MG Rover’s supply companies to hold their nerve."

Ian Lambeth, one of the assembley line workers who finished their shift at 2pm, said there was a mood of despondency inside the plant. "We just keep hearing rumours that suppliers have stopped trading with us. We have even heard a rumour that the banks have ceased trading with us. Everyone is very despondent. It all depends on the Chinese deal. If they don’t do this deal I think we will be finished."

Another worker, who asked not to be named, said, "People don’t know whether they are going to have a job tomorrow, they worry about whether they are going to lose their house and how their families are going to suffer."

None of the 6,000 workers on duty at the plant this morning were sent home early, and production did continue on the MG TF line. But production of the Rover 25, 45 and 75 was halted.

Talks over the possible £100 million loan continued as a team of officials from the Department of Trade and Industry remained in Shanghai.

An MG Rover official said the company remained optimistic that once the loan was confirmed, normal production at Longbridge would resume.

SAIC is seeking guarantees MG Rover’s holding company Phoenix Venture Holdings can keep the company solvent for the next two years. The Government loan may help it achieve that. MG Rover has denied reports it will run out of money by the end of this week.

Car sales at MG Rover have been dwindling badly for the past two years - last month, according to figures out today, it sold only 12,545 cars, 17 per cent down on March 2004.

The company said: "Despite the current media spotlight on the company, we have maintained our market share in the first three months of 2.9 per cent."

Negotiations between MG Rover and the SAIC continue but it appeared no deal would be signed before details of the loan were agreed. Workers arriving at the company’s huge plant in Longbridge today said they wanted the uncertainty to end as soon as possible.

The management is still awaiting EU approval of the proposed £100 million loan, the European Commission still awaiting notification of the move.

A spokesman for the commission said that the loan would be assessed under "compliance with regulations" on government aid.

EU regulators will be looking closely at the terms of the loan as either restructuring or rescue aid -- the distinction of which will be crucial for providing any green light from Brussels.

MG Rover, a former industry icon dating back to 1905, was sold to Germany’s BMW in the 1990s before returning to British hands when it was sold to Phoenix four years ago.

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