Just one day after ruling out a Phoenix offer because of the bid's insufficient financial backing, BMW has now agreed to open up its books to the consortium, and says talks could start within days.

BMW Group will now pursue alternative routes to bring to an end its involvement in Rover... [including] the sale of Rover Car Operations or its closure

BMW statement

But the German car maker is still open to fresh offers for Rover.

"We made it quite clear in our statement that we are looking for alternatives," said spokesman Hubert Bergmann.

Venture capitalists Alchemy pulled out of talks over disagreements about who would foot the bill for redundancies at the Longbridge plant.

The move caught BMW by surprise, and it warned that if no buyer was found within a month, it would close down Longbridge and other parts of Rover Cars.

Breakdown 'final'

Trade unions are delighted over the development, as they believe that the Phoenix plan would safeguard more jobs.

Alchemy Partners and BMW have ceased negotiations as they were unable to agree upon certain contractual matters, some of which arose yesterday

Alchemy Partners

Alchemy had been in advanced negotiations with BMW and many had expected the two companies to announce a deal later on Friday.

A spokeswoman for Alchemy said the decision to withdraw from the talks was "final". At issue was who would pay for redundancies and pension funds at Longbridge, costs that could run into hundreds of millions of pounds.

John Moulton, managing partner at Alchemy, described the development as "something of a tragedy" and said he feared Longbridge would now close.

John Moulton of Alchemy Partners is known to be a tough negotiator

BMW board member Werner Neugebauer said he had not expected such an outcome.

The German stock market reacted faster. BMW's share price plunged more than 9% before making a recovery.

Rover Group is losing its German parent �2m a day and the Munich-based company is desperate to cut its losses as soon as possible.

At this stage, the only other bid on the table is from Phoenix, led by former Rover executive John Towers and backed by trade unions at Rover.

Alchemy's withdrawal does not affect the sale of Land Rover to Ford, BMW said.

Workers 'dazed and confused'

A union official, Derek Robinson, welcomed the breakdown of talks but warned that the Phoenix bid would not be "plain sailing".

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said: "Once again the workforce is being kicked around while BMW ponders its future. All this is leaving our members dazed and confused and we are being kept in the dark."

BMW had previously said that the rival bid by the Phoenix Consortium had not sufficient financial backing yet to buy the Longbridge operation of the UK car maker.

The Phoenix Consortium is still working on its business plan.

'Far better position'

Only when that is in place will the group be able to round up the necessary financial backing.

Industry analyst Mark Norman of CAP Motor Research said the Alchemy pull-out was in the short term "awful news" for Rover employees and dealers as it would lead to further uncertainty.

But he added that Mr Towers was now "back in the running and in a far better position than he was before".

"BMW needs to get something out of all this and they will have to listen very carefully to what the Towers consortium says", Mr Norman said.

Phoenix submitted its bid for Rover on 14 April, a month after Alchemy and BMW announced that they were negotiating a deal.

Alchemy had planned to end mass car production at Longbridge and build MG sports cars instead, at the cost of thousands of jobs.

Phoenix has proposed to cut Rover production by half, but promises that there will be fewer job losses.