Jobs at risk as BMW cuts UK spend

THOUSANDS OF jobs in the car component industry were under threat yesterday after BMW, Rover's parent company,warned that it intends to shift pounds 1.5bn worth of orders overseas.

In a further blow to the industry, Brussels confirmed it was investigating a pounds 152m Government aid package for Rover's Longbridge car plant in Birmingham, that was designed to secure 9,000 jobs.

BMW said it wanted to reduce the proportion of UK components in Rover cars from 90 per cent now to 50 per cent in the next five years. This will reduce Rover's UK component spending from pounds 3.1bn to under pounds 1.7bn, placing a question mark over scores of suppliers. The news prompted a fall in share prices among automotive component groups. Mayflower, which supplies body panels to Rover, fell by almost 6 per cent, while Laird and Britax shares ended 3 per cent lower.

A BMW spokesman defended the move by saying that UK component prices were on average 50 per cent higher than those on the Continent. "There is an inherent imbalance in our purchasing spread. We need to hedge much more by purchasing more components in the markets where we sell our cars."

BMW's head of purchasing, Wilhelm Becker, has already told Rover's 700 UK suppliers that it expects 80 per cent of Rover's component purchases to be billed in euros by April next year. All new suppliers must quote for business in euros and existing suppliers will have to match the average euro price quoted by rival Continental suppliers. Rover said that even when its UK purchasing levels fell to 50 per cent its cars would still contain more local content than any other UK manufacturer's.

Meanwhile both Stephen Byers, the Secretary of State for Trade and Industry, and BMW urged the European Commission to complete its aid investigation quickly.

Brussels' aid rules require member states to prove that without state support, an investment project would be located outside the EU. BMW claims it considered switching the project to Hungary, but the Commission has doubts about how serious it was.