BMW set to confirm pounds 2.3bn investment at Longbridge

BMW, THE German car maker, is set to confirm on Wednesday that it will invest up to pounds 2.3bn at the Rover Longbridge plant, Britain's biggest factory, as part of a long-term plan that could see the company build 1.0 million cars per year in the UK.

The chairman of BMW, Joachim Milberg, and Stephen Byers, Secretary of State for Trade and Industry, are expected to make a joint announcement that will guarantee a pounds 150m government subsidy for Rover's pounds 1.7bn project to design and build a new small to medium-sized car at Longbridge. Mr Byers is due to return on Wednesday from a trade mission to China. The investment at Longbridge will create one of the country's most automated manufacturing plants and will safeguard nearly 10,000 jobs.

An estimated 60,000 jobs in the Midlands depend on the factory. The European Commission has indicated that it will permit the aid plan since the subsidy is less than 10 per cent of the total investment.

The new medium-sized R35 car to be built at Longbridge is to replace the Rover 200 and 400 series. The vehicle will compete head-to-head with Volkswagen's Golf. A further pounds 600m will be invested by BMW in developing and producing the new Mini, to be launched in 2001.

Initial annual production of the R35 is forecast at between 350,000 and 400,000 units early in the next century, with production of the Mini taking total output to around 500,000 cars per year. In the longer term, Rover's total production could rise to 1 million cars annually.

The government, which has been willing to grant the subsidy in return for a substantial investment from BMW itself, has sought to raise skills levels and productivity in the automobile manufacturing sector.

The investment at Longbridge may mark the final attempt by the Germans, who acquired Rover in 1994 for pounds 800m, to resurrect its British unit, which lost pounds 466m last year. Rover has been crippled by the strength of sterling, low productivity and falling market share.

A preliminary indication of Rover's health may emerge shortly when figures are released to indicate the number of forward orders for the new R75, the first BMW-designed Rover to be produced since the German group acquired the company from British Aerospace.