MG Rover Group Limited (MG Rover) and China Brilliance Industrial Holdings (CBIH) have entered into a long-term strategic Alliance and co-operation agreement to finance, develop, manufacture and market world-class automobiles for the mutual benefit of both partners.

The alliance provides the potential for MG Rover derived cars to be manufactured in China, including those that will be jointly developed. This will include the new medium-sized car, for which the styling direction was previewed at the Geneva Motor Show. Plans have also been put into place for the joint development of a new small car and consideration will be given to the development of additional new models. Equally the opportunity also exists for MG Rover to manufacture and market CBIH derived vehicles.

The companies will co-operate on the supply and manufacture of engines and development of a new range of engines.

MG Rover will provide considerable technical support and assistance in order to establish the necessary manufacturing processes and systems in China. This will extend to the establishment of a joint Research and Development centre in China.

The alliance will seek significant cost benefit from larger manufacturing volumes, going forward. A joint component sourcing strategy committee will be established in order to maximise the economic benefit of the companies’ combined purchasing.

The alliance will enable both partners to grow more quickly, than would otherwise be possible because they will benefit from each other’s strengths. It has been structured in a way that MG Rover and CBIH both benefit financially from combined alliance sales.

Kevin Howe, MG Rover, Chief Executive said: "This is a wide-ranging global alliance that spans the full breadth of both company’s activities, and presents many opportunities. I am delighted that we have so much in common. Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does. It is clearly the leading automotive manufacturer, in the world’s fastest growing car market.

"China will be one of the most important markets for the alliance. It is the world’s fastest growing market for cars. The alliance can move quickly into a position where it can fully exploit this market’s potential."

Dr. Brian X. Sun, Chief Executive, CBIH said: "From the beginning it was very clear Brilliance and MG Rover have a similar philosophy and operating style. We are both ambitious, clear in our vision and quick with decision-making.

"Equally important is the fact that MG Rover and CBIH do not have products that compete directly, which means we can take the full benefit from our alliance, without our plans conflicting in any way.

"Benefit will be derived from large economies of scale, which will spread development costs for new products over bigger volumes, and increase purchasing power for components, which will in turn make our products more competitive.

Together we will be a force to be respected in the automotive industry."

The alliance creates the potential for much greater global reach and scale. Market territories have been assigned to each partner. Vehicles can be manufactured and sold exclusively by CBIH in China, and the majority of Asia and Africa. MG Rover will have exclusivity in all other markets, however consideration will be given to combining efforts in the USA.

A new joint venture company will be created. Ownership of the company will be shared 50/50 between MG Rover and CBIH. Three directors from MG Rover and CBIH will form the board. They will oversee the collaboration and manage alliance objectives. There will be no exchange of equity between MG Rover and CBIH, however both parties will invest substantial resources into ensuring the success of the alliance.

Discussions between MG Rover and CBIH began in the second half of 2001. In December a statement was issued outlining the scope of the proposed Alliance. Today, both MG Rover and China Brilliance are very pleased to announce that agreement has been reached.

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