Vanmaker LDV yesterday was yesterday forced to deny industry rumours that it was in financial trouble after temporarily laying off 700 workers and suspending production of its new Maxus range.

And in a day in which new storm clouds appeared to be gathering over the West Midland manufacturing sector, Ford acted to scotch talk that it was about to put Jaguar up for sale.

Speculation that LDV had run into cashflow problems and that suppliers were not being paid have been rife for some time.

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The Washwood Heath company, the last major Britishowned vehicle manufacturer, strongly denied that that was the case.

But it did emerge yesterday that the company was negotiating a new finance package with an unnamed American private equity group.

The new cash injection will help to finance future developments of the Maxus, including the important minibus variant.

Full details are expected to be announced later this week.

Spokesman Steve Miller said: "LDV can confirm that it has been in discussion for a number of months with potential investors in respect of a refinancing package aimed at funding of the Maxus model programme, in particular the minibus and also the chassis cab range.

"Those discussions have reached a successful conclusion and we aim to announce further details later this week.

"We can also confirm that LDV did stop production seven working days ago. This was in order to rebalance vehicle stocks, complete customers' sold orders, refurbish vehicles through the LDV approved users' programme and upgrade skills training through the Automotive Academy."

Mr Miller said the 700 laidoff workers had been paid and cheques to suppliers were going out on a fortnightly basis.

"If anyone has not been paid it is purely because of an administrative error," he added.

While the Maxus - the first totally new vehicle to be developed by LDV since the company emerged in its present form following a management buy-out from the old Anglo-Dutch Leyland DAFgroup which crashed in 1993 - has won strong sales since it was launched earlier this year, industry sources said it was proving more expensive to build than anticipated.

This means it is being undercut in price by rival products from the likes of Ford and Mercedes. LDV had to carry the bulk of the £500 million development costs itself after its potential partner Daewoo crashed.

The company received an extra £90 million cash injection in 2004 from 3i, one of the original MBO backers, and European Acquisition Capital and English Growth Fund.

It raised a further £45 million from the sale and leaseback of its 85-acre site which is next to the former Alston train plant which stopped production earlier this year with the loss of about 1,000 jobs.

LDV has also invested millions in a new manufacturing facility for Maxus and was expected to double its workforce to about 2,000 over the next five years.

Ford of Europe boss Lewis Booth said in Brussels yesterday that industry hints that the ailing American giant was planning to sell loss-making Jaguar, part of its Premier Automotive Group stable of European luxury cars that also takes in Land Rover, Aston Martin and Volvo, were wrong.

"There is no truth in those persistent rumours," he added.