BMW ignores EU Rover probe

German car maker to press ahead with pounds 3bn investment

BMW has pledged to go ahead with its multi-billion investment in the Rover plant at Longbridge despite the news that a European Commission probe into pounds 152m of Government aid could take up to a year.

Richard Gaul, a spokesman for the German car company, said it was a risk it was prepared to take: "It's the financial risk for us."

The inquiry, to be carried out under the guidance of the new EU Competition Commissioner Mario Monti, will focus on whether BMW - which bought Rover in 1994 - would have moved production to Hungary if the UK government aid had not been forthcoming.

A senior EU official said in order to establish whether BMW was serious in its threat to shut down the Longbridge plant, it had to work out whether it would have really been cost-effective to do so after taking into account the cost of redundancies at Longbridge and of building a plant in Hungary.

The Government announced last month it was to contribute pounds 152m in regional assistance to a BMW investment package worth up to pounds 3bn. Around 50,000 jobs depend directly and indirectly on the long-term future of the Longbridge plant.

The European Commission is said to be furious that the Secretary of State for Trade and Industry, Steven Byers, did not say the rescue package would be subject to the Commission's approval when he announced the deal. Indeed, a senior Commission official told The Independent on Sunday that the UK Government tried to obtain tacit approval from DGIV, the EU department that deals with state aid cases, before formally notifying Brussels of the deal "but didn't get anywhere".

Another senior Brussels source said the UK government "should have worked on DGIV before to save itself from being put in an embarrassing situation later". The Department of Trade and Industry says it plans to submit an official application to be able to give the aid "soon".

The Commission said that the Government should not release the aid until Brussels has approved it.

Mr Byers told Parliament last week that from his conversations with the outgoing Competition Commissioner Karel Van Miert and his officials he was "confident that we will succeed in achieving commission approval for the application".

However, Mr Van Miert immediately reposted that it was far from a done deal.