Phoenix rising as Alchemy pulls out of Rover deal

BMW has been forced into fresh negotiations with the Phoenix group after Alchemy Partners suddenly pulled out of a deal to purchase Rover last Friday.

Alchemy was reportedly close to signing a deal when it ended negotiations claiming that differences with BMW had arisen the day before.

Reuters reported that a financial wrangle caused the talks to collapse.

BMW is now in a race against time to stem massive losses from the British Rover plant and said that the Longbridge plant may be closed if a buyer is not found within a month.

BMW has lost US$4.5 billion since buying Rover in 1993.

Phoenix is headed by former Rover chief Mr John Towers and has the support of the British Government and unions because it promises to protect the jobs of up to 24,000 workers.

Although Reuters reports Indian car-maker Tata has entered the bidding, BMW-appointed Rover chief Mr Werner Samann said in a statement that selling Rover to the Phoenix consortium was the only way of keeping the plant open.

"We will now deal with the offer of the consortium around John Towers with urgency," said Prof Samann.

"At the moment this path is not only open but also the only desirable opportunity to continue the Rover Car Operation. Otherwise closure is inevitable." He said those talks would commence tomorrow (Tuesday).

Only last Thursday, BMW declared that the Phoenix bid was "financially not secured", but the company said its financial viability had been proven within 24 hours.

The British Government has previously asked the European Union to approve a 152 million pound aid package for the Longbridge plant, which would greatly assist the Phoenix bid.

Although a Government spokesman said Phoenix had not approached it for aid, he conceded they have kept in close contact.

British Prime Minister Tony Blair is understood to have asked his German counterpart, Chancellor Gerhard Schroeder, to encourage BMW to drop Alchemy in favour of Phoenix because of the jobs issue.

BMW will continue to build the new Mini at Oxford and the $3 billion sale of Land Rover to Ford is not affected by the latest developments.