BMW to tighten links with Rover

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BMW forecast closer co-operation with its UK car division yesterday when the German company said they would save tens of millions of pounds through joint purchasing.

Wolfgang Reitzle, a BMW director, said the savings would come as the two companies developed and marketed new models that used similar parts.

The companies, which had a combined turnover of DM27bn (£12.2bn) last year, have always said they will keep their marketing strategies separate to avoid blurring their identities. But analysts say closer integration of the two operations is essential if Rover is to improve profitability.

BMW, which bought Rover last March, told its annual meeting yesterday that the division had performed far better than expected. Earlier this month BMW reported that Rover made an operating profit of DM40m in 1994, and a net profit of DM12m, under Germany's "conservative" accounting rules. Rover, including the highly profitable Land Rover, is thought to have made an operating profit of £56m in 1993, but a net loss of £9m.

Volker Doppelfeld, BMW finance director, said: "Rover still needs to be fully integrated into BMW, but we have laid a good basis. We have had a great success with Rover. It has performed better than planned. We had not expected it to make a profit under our accounting rules so it has done better than expected. Their return on sales will rise. They can achieve more of their potential in future than they have in the past."

BMW said sales, including Rover, rose to DM11.25bn in the first three months of this year. Excluding Rover, sales rose to DM8.5bn, from DM7.5bn. Total group car sales were 263,800 vehicles in the period from January to March. Excluding Rover, car sales rose to 150,000 from 140,019.

BMW said it expected "satisfactory'' profits for 1995 but warned about the impact of the strong mark on its finances. BMW's net profits in 1994 jumped 35.1 per cent to DM697m. Some analysts recently revised down profit growth forecasts for 1995 and 1996 due to exchange rate fears.