EXACTLY five years ago today the present owners of MG Rover were in talks with Stephen Byers, then Trade and Industry Secretary, as he brokered a deal to save Rover as a volume car manufacturer.

The unthinkable alternative had been closure by its owner, BMW, or sale to a venture capital group that planned to reduce Rover to a niche sportscar producer.

MG Rover was desperately pleading for state assistance yesterday, but the Department of Trade and Industry said that there would be no money without the promise of a joint venture deal with Shanghai Automotive Industry Corporation (SAIC). The Chinese company wants surety of solvency before a deal, Rover looks likely to collapse without government assistance, but the DTI wants a deal before it will release the cash. Catch 22.

How has the rescue of five years ago reached this point?

MG Rover always emphasised the need for a larger partner in the medium and long term. Without one, it was too small to develop new cars and did not have the firepower to compete in a global market. The established large carmakers were not interested, leaving only those from developing countries.

MG Rover began talks last year with SAIC, an ambitious company eager for greater technological expertise and access to Western markets. In November MG Rover hailed the deal as imminent and said that the partnership would deliver £1 billion of investment. Since that moment, however, the going has been considerably tougher.

In November the Government allowed MG Rover to defer its VAT bill until it could clinch a deal with SAIC. It also began a charm offensive, with Tony Blair writing to the Chinese Government and Gordon Brown using a trip to China to lobby SAIC to sign the deal.

With an election looming, the desperation to get the deal done became increasingly intense. In Shanghai, meanwhile, doubts were growing about the solvency of what was a big car-making name.

The political lobbying also came at a time when Chinese companies were flexing their muscles more, playing high-stakes and trying their hand at becoming investors rather than investment targets. They are not as much in awe of the West as they perhaps used to be.

MG Rover’s sales have plummeted over the past 18 months and the company has been mired in controversy about the pay of the four founding directors.

Industry experts say, however, that the negative publicity and poor image of the company has caused only a slight deterioration in sales. They say that the age of Rover’s range and its inability to offer large financial incentives amid a very tough car market has deterred people from the showrooms. MG Rover’s most recent totally new car is the Rover 75, launched in 1998.

Five years ago it launched a range of MG saloons based on the Rover 25, 45 and 75 models. These have been re-engineered for a faster, sportier performance and have been popular. It was planned that they would provide a quarter of the company’s sales but lately they have provided nearly half as the Rover range has slumped.

MG Rover does not reveal its financial figures until more than ten months after its year end but it is thought that it lost about £100 million last year.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive