Car maker MG Rover has unveiled a lower than expected loss of �254m for the eight months since it was sold off by BMW last year.

Although the firm is still in the red, the loss - which covers the period from 9 May to 31 December - was not as bleak as the �300m deficit some had earlier feared.

MG Rover was upbeat about its performance, saying it had �329m in the bank at the end of last year, and hoped to become profitable in 2002.

The BBC's business correspondent Greg Wood said: "MG Rover has proved a survivor. The key has been to cut costs, to make fewer cars and to sell them at lower prices."

Led by former Rover executive John Towers, the Phoenix Consortium bought loss-making Rover for a nominal �10 from BMW and renamed it MG Rover.

The work goes on

Although there have been 2,000 job losses, more than 5,000 workers are still employed by the Longbridge plant in the West Midlands.

MG Rover hopes to produce an average of 200,000 units a year over the next five years.

The figure for this year is likely to reach only 180,000, but the 2002 total is expected to exceed 200,000.

The company has introduced an estate version of its top-of-the-range Rover 75 saloon and is also bringing out four new MG sports models.

The firm's challenge now is to design a medium-sized car to replace the ageing Rover 45.

'Critics confounded'

MG Rover has also acquired the US-Italian sports car group Qvale Automotive and has announced that this will lead to the production of a super MG - the X80 - next year.

Tony Woodley, national officer of the Transport and General Workers Union, said he believed the company was on track to return to profitability.

"Critics within the industry and the media have been confounded by the company's performance.

"T&G members at Longbridge have played their part and will continue to do so because we know the challenges the company still faces to return to profit," he said.