MG Rover has confirmed it is to spend �300m on developing a new medium-sized car to replace the Rover 45 and MG ZS.

Analysts have questioned the cash-strapped car maker's ability to carry out costly development work without a partner.

But the company insists it has the cash to complete the project on its own.

MG Rover chairman John Towers told BBC News Online in May that it was planning replacements for the Rover 25 and 45.

'Group has the cash'

Chief executive Kevin Howe this week confirmed that the 45 replacement will appear in 2004.

Speaking at an industry conference, Mr Howe said full details of how the new model will be developed will be revealed later this year.

He insisted that �300m was sufficient to cover the cost of creating a new car.

The company planned to spend �600m in total on developing new models, he added.

Reducing losses

MG Rover is attempting to go it alone as a medium-sized car manufacturer after being sold off by BMW last year.

The car maker unveiled a lower than expected loss of �254m for the first eight months since the sale.

It also said it had �329m in the bank at the end of last year, and hoped to become profitable in 2002.

No announcement due

A MG Rover spokeswoman said there was no immediate announcement planned on a replacement for the 45.

But she confirmed that the company would be spending �300m of its own money on creating a new medium-sized car.

Around 1,000 MG Rover workers were sent home for the day on Thursday after a supplier failed to deliver a consignment of gearboxes.

Assembly workers and paint shop staff at the Longbridge plant in Birmingham were told there was no work for them until Friday.