German rules put Rover in red

Rover Group's pounds 91m profit, revealed last month, became a pounds 148m loss yesterday as owner BMW highlighted the difference between UK and German accounting rules, writes Russell Hotten.

BMW said its UK division had sunk into the red, after making a pounds 16m profit in 1994, because Germany's conservative accounting methods meant higher investment and depreciation costs were included. Two weeks ago Rover announced that under UK accounting its profits had risen to pounds 91m from pounds 83m.

A spokesman said BMW, which paid British Aerospace pounds 529m for Rover two years ago, had lifted its investment in the division by 30 per cent to more than pounds 500m in 1995.

"The depreciation charges are purely as a result of the high level of capital investment which is itself a measure of BMW's confidence in the company," he said.

That planned investment is expected to continue for the rest of the decade with an expected pounds 2bn being spent on upgrading facilities, a new engine plant, and launching new models.

Rover's sales revenue had risen to pounds 5.6bn from pounds 4.9bn, while car production rose 4.8 per cent to 501,300 vehicles, BMW said. Sales for the group as a whole rose 2 per cent to DM11.5bn (pounds 5.18bn) in the first three months of 1996. Production during the same period fell 6 per cent to 284,900 units while car deliveries to customers slipped one per cent to 265,200 units.

Production at Rover fell 3 per cent in the first quarter to 132,400 units. "For 1996 as a whole, we expect an increase over 1995 in production and sales for both BMW and Rover," Bernd Pieschetsrieder, BMW's chairman, said yesterday.

In 1995, BMW group car production totalled 1,098,582 vehicles, with the Rover unit showing a rise in production of 34.1 per cent. BMW previously reported group net profit down slightly to DM692m in 1995 from DM697m a year earlier.