Abbey offers loans to Rover car buyers

MG ROVER, the car maker, won a significant vote of confidence yesterday from Abbey National when the mortgage bank agreed to provide finance to support its dealer network in a multi-million pound deal.

Under the agreement, Abbey National's motor vehicle finance division, First National Motor Finance, will provide car loans to retail customers buying through MG Rover's 300-strong UK dealer network.

The finance was previously provided by BMW, the German car maker, which sold Rover to the Phoenix consortium last May for pounds 10. MG Rover is still attempting to extract more money from BMW in addition to the pounds 500m dowry the German company gave Phoenix on completion of the deal.

MG Rover argues that it is entitled to compensation because of the falling value of the stock of unsold cars it inherited as part of the sale. But BMW has told the British company that there is no more money.

A survey published yesterday said that new car prices fell by a record 12.2 per cent in the year to November. However, Alliance & Leicester, which carried out the survey, added that the decline in prices would soon begin to slow down because of the fall in the pound against the euro and economic uncertainty.

MG Rover is also struggling in its attempts to persuade BMW to sell it the engine and gearbox manufacturing facilities at Longbridge, known as Midlands Powertrain. BMW is thought to be under pressure from Ford to find an alternative buyer. Ford, which also buys engines from Midlands Powertrain for its Land-Rover unit, is concerned about the long-term prospects for MG Rover.

Similar worries have put back the sale by BMW of the Swindon body panels factory, which counts MG Rover as its biggest customer.

Mayflower is among possible bidders for the business, thought to be worth between pounds 80m and pounds 100m. The sale had been due for completion this month, but it now looks likely to be delayed until the spring, according to potential bidders.

Copyright 2001 Independent Newspapers UK Limited
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Michael Harrison Business Editor "Abbey offers loans to Rover car buyers". Independent, The (London). Jan 10, 2001. FindArticles.com. 16 Jun. 2008. http://findarticles.com/p/articles/mi_qn4158/is_20010110/ai_n9664902