The directors of MG Rover were forced to admit defeat at lunchtime today, when they formally announced that they had appointed the accountants, PriceWaterhouseCoopers, as administrators for the ailing business.

The car maker's future and that of its 6,000 employees had been in turmoil overnight, following conflicting statements from the board of directors and government ministers over its status, raising false hopes that it could be salvaged as a going concern.

Phoenix, the company’s owners, said this afternoon that, after a meeting this morning with PWC, union leaders and Patricia Hewitt, the Trade and Industry Secretary, they had formally begun insolvency proceedings.

"The directors are taking the necessary steps to appoint administrators," Phoenix said.

The announcement that the company had been placed into administration, which protects it from creditors, rather than receivership, which typically precedes the break-up of a company, raised hopes that MG Rover’s Longbridge plant in Birmingham may be saved.

The plant’s 6,100 workers were asked to return to work on Monday, by which time the Prime Minister, Tony Blair, is expected to have visited the plant, after flying back from the Pope's funeral in Rome.

Tony Woodley, the leader of the Transport & General Workers’ Union, said: "The administrator, who I have met this morning, acknowledges that the priority for all of us is to explore every possibility of maintaining Longbridge as a going concern.

"Today, Rover workers need all possible assistance, above all from political leaders, to help keep car manufacturing at Longbridge."

He added that the quest to save the plant "must involve" an attempt to reopen talks with the Shanghai Automotive Industry Corporation, of China, whose failure to back investment in MG Rover led to today’s collapse.

The company had spent the past six months in detailed negotiations with SAIC and the UK Government, trying to secure a £1 billion takeover deal to salvage the 100-year-old business.

But the deal was delayed over a £100 million bridging loan from the British Government, aimed at tiding over MG Rover until the Chinese had assumed control. When the loan failed to come through, suppliers, anxious about whether their bills would be paid, stopped providing component parts to the Longbridge factory, precipitating the crisis when production was halted on Thursday.

Component makers have already begun laying off staff, Ms Hewitt said this morning, announcing a £40 million support package for MG Rover suppliers.

The directors’ strategy for Longbridge was thrown into confusion last night when Patricia Hewitt, the Trade and Industry Secretary, announced the company had been put into receivership, while the consortium confirmed only that it had asked PWC to advise on options.

The company stuck by its position this morning.

The company's options must have been severely limited, as PwC were appointed as administrators within hours of the earlier statement.

The events of the previous evening only fuelled speculation and confusion over the company's outlook.

Ms Hewitt maintained that she had been informed by John Tower, the head of the Phoenix consortium which owns MG Rover, at 9.20pm yesterday that the receivers were being called in. It had been made "absolutely clear" to herself and to Tony Woodley, the leader of the Transport and General Workers’ Union who has been closely involved in talks over the car marker’s future, that the company was being placed in receivership.

"We had no choice except to tell the workforce and the suppliers," Ms Hewitt told BBC Radio 4’s Today, before a visit to MG Rover's Longbridge plant in Birmingham. "They could not be kept in the dark any longer."

Mr Woodley also said that he was expecting MG Rover to be placed in administration. "We need to talk to the administrator who will inevitably be appointed later today," he said.

Administration and receivership, while both insolvency procedures, differ markedly in approach. While administration is aimed at protecting companies from their creditors while a restructuring plan is implemented and may allow the resurrection of a failed concern, receivership involves the sale of a business’s assets in an effort to meet debts.

PriceWaterhouseCoopers has yet to confirm what action, if any, it will take at MG Rover. Although BMW, which sold Longbridge to Mr Tower’s Phoenix consortium in 2000, has retained rights to the Rover name, many accountants believe that the MG marque, which continues to brand a line of commercially successful sports cars, could be revived in a fresh venture.

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