The Cowley car plant is to lose production of the award-winning Rover 75 as part of a dramatic deal signed today between the Phoenix Consortium and BMW.

Manufacture of the luxury saloon will be shifted to Birmingham as part of a deal which aims to save thousands of jobs at the Longbridge plant.

Phoenix, which is led by former Rover group chief executive John Towers, will take over development, production and distribution of Rover Cars. It will also acquire the MG brand and other heritage brands.

Phoenix said it would continue building the Rover 25, 45 and MG sports car at the huge Longbridge factory in Birmingham. Phoenix said it also had plans to start producing an estate version of the Rover 75, codenamed the R41 after production of the 75 is switched from Cowley to the Birmingham plant.

Mr Towers said: "We are delighted that together with BMW we have secured a brighter future for Rover."

BMW chairman Joachim Milberg said: "After intensive negotiations we have managed to find a buyer for Rover whose aim is to continue running Rover and to therefore prevent the loss of thousands of jobs in the Rover plant in Birmingham, in the supply industry and in the retail business."

The two sides said contracts had been signed and completed following several days of negotiations. The short-term effect on Cowley, which is to be BMW's new production centre for the Mini, is not clear, though BMW has repeatedly said it aimed to retain the factory and the entire workforce.

The latest letter to workers at Cowley said discussions between BMW Group and Phoenix, about the disposal of Rover, did not affect the Land Rover sale to Ford, nor the Cowley plant. The news came after an announcement last night by Phoenix that the group had resolved differences with BMW over financing a buy-out of the loss-making British car-maker.

Burdale Financial, the UK lending arm of First Union Bank of North Carolina, confirmed that it had offered 200m to underpin working capital requirements for Phoenix.

BMW has also pledged an estimated 500m as part of a dowry, including assets and machinery, following its withdrawal from Rover.