Nanjing's MG Rover Acquisition May Upgrade Brand

July 23 (Bloomberg) -- Nanjing Automobile Group Corp.'s acquisition of bankrupt U.K. carmaker MG Rover Group Ltd. may help the state-owned Chinese producer upgrade its technology and raise its brand profile, said Graeme Maxton, director at the Economist Intelligence Unit in Hong Kong.

Nanjing will take control of MG Rover's assets and plans to move engine production and some auto output to China while still building some cars in the U.K., said PricewaterhouseCoopers LLP, the accounting firm administering the British automaker, in a statement. The price wasn't disclosed.

The purchase will give Nanjing, which makes vehicles with Fiat SpA, the technology and capacity to produce a wider range of engines and vehicles. Buying companies and stakes help Chinese automakers, which are forming alliances with foreign counterparts, to gain global competitiveness quickly, analysts said.

``The Chinese government wants three or four Chinese automakers to eventually become global players and expand their business outside of China,'' Maxton said today. ``There are very few businesses that can be acquired within the auto industry these days and it was a good buy for Nanjing to advance its business.''

MG Rover, based in Longbridge, England, collapsed on April 8 with debt of 1.4 billion pounds ($1.7 billion) and the loss of more than 5,000 jobs after talks to form a venture with Shanghai Automotive failed. MG Rover, which dates back about 100 years, employed 6,100 workers. At its peak in the 1960s, the maker of Rover sedans and MG sports cars employed 250,000 people and Longbridge was one of the biggest factories in the world.

Price Tag

Nanjing paid ``a little more than'' 50 million pounds for MG Rover, the Financial Times reported today, citing unnamed sources.

SAIC last year bought the designs for the Rover 75, 25 and engines for 67 million pounds. It doesn't own the equipment to build the engines or vehicles.

Nanjing's purchase ``gives the Chinese immediate brand recognition in the West,'' said Jim Sanfilippo, executive vice president of Automotive Marketing Consultants Inc. in Warren, Michigan. He compared the Rover purchase to Chinese appliance maker Haier Group's bid for Maytag Corp. ``They understand the importance of Western brands.''

Nanjing was founded in 1947 and has 16,000 employees and annual production capacity of about 200,000 vehicles, according to the company's Web site. Nanjing's major products are trucks, cars and travel buses. The company, which makes Fiat Palio and Siena cars, posted a loss last year.

``The Chinese see the automotive industry as a massive and glamorous industry that will create jobs, so they are closely watching the moves of other automakers,'' Maxton said. ``It can be a threat eventually, but not a huge one at the moment.''

Shanghai Automotive

PricewaterhouseCoopers had been in talks on the possible sale of MG Rover with Nanjing, Shanghai Automotive Industry Corp. and British businessman David James.

Shanghai Automotive, China's largest carmaker, said earlier this month that it had agreed to collaborate with Magma Holdings Ltd., a company formed by former Ford Motor Co. executive Martin Leach and former General Motors Corp. executive Edward Sabisky, on a bid for MG Rover.

The firm, which bought a stake in South Korea's Ssangyong Motor Co. in October, initially offered to buy only MG Rover's engine unit, and its expanded bid last week for the entire company was less than the Nanjing offer, the accounting firm said.

Four businessmen, led by auto executive John Towers, bought Bayerische Motoren Werke AG's Rover Cars for 10 pounds in May 2000 to form MG Rover. They received carmaking, engine and parts plants and a 500 million-pound loan from BMW to help them run the business, which had racked up losses of $6 billion in six years.