14,000 jobs look doomed at Rover
Sunday 07 February 1999
Germany's secretive Quandt family, which owns 46 per cent BMW, removed Mr Pischetsrieder as chairman after an acrimonious board meeting on Friday. And while union votes on the BMW board blocked his replacement by Wolfgang Reitzle - a long-time critic of BMW's pounds 800m 1994 purchase of Rover who would have certainly closed down the Longbridge operation in Birm- ingham - the plant still faces a uphill struggle to survive.
For its future depends on BMW investing pounds 500m in a new car to replace the Rover 200 and 400, as the German car maker is itself coming under big financial pressures.
BMW's new chairman, 56-year-old Professor Joachim Milberg, previously head of production, will have to decide swiftly on a viable strategy for BMW and its loss-making British subsidiary. With leading international rivals queuing up to bid for BMW at its moment of weakness, Mr Milberg has little time.
Politicians in Germany will continue to be heavily involved. So will Tony Blair, given that so many British jobs are at stake. On Friday, Deputy Prime Minister John Prescott called for Longbridge to be saved, but the pounds 500m investment may well seem too risky given the continuing slide in Rover's market share price and the company's pounds 300m loss last year.
While BMW's core business remains profitable and successful, many believe that its long-term future must be within a larger group such as Volkswagen or Ford. Both would be eager bidders.
"The powers that be in Germany will want a German solution involving Volkswagen. I am sure Chancellor Gerhard Schroder [a former member of Volkswagen's supervisory board] will be involved," said Professor Daniel Jones of Cardiff Business School.
Ferdinand Piech, Volkswagen chairman, has beat a path to the door of the BMW's controlling Quandt family. But Stefan Quandt and Susanna Kletten nee Quandt, both members of the BMW supervisory board, insist they remain committed to an independent BMW.
Mr Milberg will now have to decide whether BMW can remain independent, finance Rover's losses and invest heavily in Longbridge.
Many doubt that this is possible, given Rover's recent performance. Klaus- Jurgen Melz- ner, analyst at Deutsche Morgan Grenfell, believes that trying to develop a full range of Rover models has been shown to be a mistake. Markus Plumer, analyst at WestLB, thinks Rover faces "an incredibly testing six months".
The temptation to sell all or part of Rover is great. Either Ford or Volkswagen would be potential buyers or partners. Ford would be preferred by the British Government because this would reduce the job losses in the supply industry.
Even so, it would all be very painful - and Longbridge could easily prove surplus to requirements. BMW itself is considering producing the replacement of the 200 and 400 series in Hungary.
Selling Rover would not secure BMW's long-term future. A niche producer of 500,000 cars a year, it remains over-dependent on a one-car platform, the 3 series.
Professor Dan Jones said: "The chances of BMW staying independent in the longer term are slim. It has another three to five years. The competition is getting tougher all the time. Look at the new small Toyota Lexus. Audi will continue to improve, as will Mercedes Benz."
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