Interview: Walter Hasselkus - Make or break for Rover boss

Despite weak sales and job losses, he has the workforce on his side. But the drive for profit is coming to a crunch, says David Brierley
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The Independent Online
IT IS just two years since Walter Hasselkus stepped into the RAC Club on Pall Mall to meet the British press. The tall, grey-haired Rhinelander had just replaced an Englishman as head of Rover. He was grilled by journalists as if Rover was a triumphant British success ruined by the Germans.

If that was a warning, worse was to come. A documentary series revealed the lows of Anglo-German relations at Rover. And - despite massive investment in men and machines by BMW - Rover, the UK's largest exporter of manufactured goods, has struggled to sell cars and make money. The goal of breaking even by 2000, which failed to impress British journalists two years ago, is unlikely to be achieved. Just when BMW will see an adequate return on its investment is unclear.

This has not endeared Rover to the German press, which has dwelt on the contrast to BMW, frequently airing internal criticism of Rover and rumours about BMW's longer-term commitment. After all, BMW's shares have suffered badly from Rover's performance.

Hasselkus has needed and received strong public support from Bernd Pischetsrieder, BMW chairman. At last year's Frankfurt motor show they stood smiling side by side as the design of the new Mini was unveiled. Although intended to deflect criticism, the gesture emphasised the fact that Rover has been slow to produce new cars in the BMW era. Speaking on the Rover stand at Frankfurt, Hasselkus underlined how much had been done and how much still needed to be done.

The mere existence of a well-designed Rover stand at Frankfurt was both an innovation and a tribute to the immense marketing effort BMW has put behind the brand overseas. Even in Frankfurt, Hasselkus did not seem optimistic about Rover breaking even by 2000. Now he admits: "They were very ambitious plans. They depend upon the pound and the wider economy."

Though he has a doctorate in law, Hasselkus has never worked as a lawyer, preferring to build a career within BMW. Yet the training has left its mark. In his dealings with the press, Hasselkus is never less than courteous and self-possessed. He is also notably ready to grin in adversity.

Before joining Rover, Hasselkus sold fast machines with great success. Like many high-flyers, he progressed from the head office planning department through BMW's subsidiaries. In 1980, he moved to Britain. Helped by a strong pound, he doubled BMW sales in three years. Then he was dispatched to South Africa where he turned round the company from loss. He says: "It was a tremendous experience. I love the land and the people. The kids did not want to leave." He returned to Europe to head BMW motorcycles before joining the BMW main board.

His appointment to head Rover came, he insists, as "a total surprise". If it has proved a poisoned chalice, Hasselkus has been careful not to let it show. Speaking after the BMW board meeting on Thursday, he is sanguine about the latest bad news. Production at the Longbridge plant of the Rover 200 and 400 will have to stop in December. He says: "We are making short- term changes to protect our long-term strategy."

The pressures are certainly mounting. In August, Hasselkus announced that Rover had to shed 1,500 jobs through natural wastage and voluntary redundancy. He insists that Rover's agreement with the unions will continue and there will be no enforced sackings.

A believer in industrial consensus, Hasselkus is making strenuous efforts to improve the skills of Rover's managers and workforce as well as investing in new cars. Unfortunately, it is all taking rather a long time to make a difference. The Rover 200 and 400, both designed before BMW acquired Rover, have failed to convince the British consumer. The Rover 200 is a relatively new car that has fared somewhat better than the 400. Overseas sales of both have been dented by the pound and the weakening of important markets. Hasselkus says: "We are reacting to problems in Britain and the recession-hit markets of the Far East. We have to keep our stocks in balance."

Rover seems to be on course for a horrendous loss after losing pounds 115m last year. Deutsche Bank estimates the loss at pounds 500m in 1998. Asked about this figure, Hasselkus sidesteps the question: "We have relatively little to do with Deutsche Bank."

For once, the British have not fallen over themselves to blame either Hasselkus or BMW for the mess. Roger Lyons, general secretary of the Manufacturing, Science and Finance Union, says: "Here we have got good management, a highly productive workforce and massive investment from BMW. The European market share of Rover is affected by the high value of sterling. That is the principal cause of this calamity."

Comments from Hasselkus about the soaring pound led Chancellor Gordon Brown to lambast Rover for low productivity. Ironically, Hasselkus thinks that addressing this problem is one of his successes. "We have improved our productivity, raised our quality and built a strong working relationship with BMW. Longbridge and Cowley have been transformed by our investment. The problem is that has yet to show in pounds and pence," he says.

While not blaming the pound for all of Rover's woes, Hasselkus insists: "The strong currency weakened our competitive position overseas. At the same time, the already high level of car imports into Britain meant our competitors could take advantage of the strong pound and were able to build on their market position."

Since BMW's takeover in 1994, over pounds 2bn has been invested in Rover. Annual investment is running at pounds 500m, three times higher than during British Aerospace's ownership. The new Mini, the new Freelander, the new Rover 75, due to be unveiled at the Birmingham motor show next month, and the Hams Hall engine plant have each cost over half a billion pounds. There are new paint shops in Cowley and Solihull, a new body plant in Swindon and a design and engineering centre at Gaydon in Warwickshire, where more than 1,000 engineers and designers will work. The new cars are beginning to arrive.

Hasselkus says: "So far, we have had a model range unaffected by the massive investments made by BMW. But the Freelander is a success, the Discovery will be a success too. And so will the new R75."

The Paris launch of the new Land Rover Discovery was overshadowed by the news about Longbridge. The Discovery gives the Land Rover plant in Solihull a full range of new four-wheel-drive models and every reason for optimism. Production there is expected to rise from 127,000 last year to 200,000 by 2005. At Cowley, production will more than double to 130,000 as the R75 replaces the Rover 600 and 800.

While Hasselkus insists that no one model can make or break Rover, the R75 is crucial to the marque. It is the first saloon car developed under BMW and the first all-British saloon for over a decade. Hasselkus would have us believe this is the "finest front-wheel drive car in the world".

If the R75 fails, the Rover 200 and 400 are unlikely to be replaced, placing the future of many of Longbridge's 14,000 workforce in question. The effects on the British car parts industry would be dire. Rover already intends to move pounds 1bn of its pounds 4.5bn parts order to foreign suppliers next year.

Hasselkus said: "Rover exports 75 per cent of its production, but buys 85 per cent of its parts in Britain. This is a strategic imbalance."

In giving Rover considerable autonomy, BMW pursued a different route to Volkswagen with Skoda and Seat. Volkswagen swallowed the brands, established new production sites and integrated the models into its range, saving costs. Skoda and Seat are now its fastest-growing brands. BMW wanted to ensure Rover remains unmistakably British. There is no platform-sharing between the two companies. Costs have remained unnecessarily high and BMW has struggled with the legacy of past under-investment.

"We have had to establish the proper infrastructure. If you go to Oxford or Solihull, it is amazing what has happened. We have massively restructured and modernised. Unfortunately, the fruits of these efforts can only be gathered in the future," Hasselkus says.

Nobody at Rover dares to contemplate the failure of the R75 or the Mini, due to be launched in 2000. Hasselkus denies that any one model can make or break the company. However, at the moment, any disaster could prove terminal.

Does Hasselkus care to name a date for break-even, given the current losses? He laughs. "Well, I'm 56 now and at BMW everyone retires at 60. But I firmly expect to lead Rover into profit before I leave."

It is to be hoped, for Britain's sake, that he succeeds.