London-based venture capitalist company Alchemy is to take over the Rover motor company in a dramatic £2 billion deal, it was announced today.
Rover's owners, BMW of Germany, said negotiations had started for the sale of the Rover and MG brands, as well as its production facilities at Longbridge, Birmingham to Alchemy Partners.
BMW will continue to supply Alchemy with the Rover 75, produced at Cowley in Oxford, on the basis of a "job contract".
The disposal of Rover and MG is costing BMW 3.15 billion euros (nearly £2 billion), BMW said.
Investment for production of the new Mini at Longbridge is being stopped and the model will instead be produced by BMW at Cowley, ready for launch in early summer 2001, said BMW.
The news of the Alchemy deal followed a meeting in Munich of BMW's supervisory board.
BMW, which took over loss-making Rover in 1995, said it would complete building its new engine plant in Hams Hall in the Midlands, which will begin operations as planned.
The company added that plans for the location of a new Rolls-Royce plant in the UK to produce an all-new model from 2003 were unchanged.
BMW chairman Professor Joachim Milberg said in the statement that the Rover turnaround by BMW had been "successful", but had been undermined by the strength of the pound.
Alchemy, which is to call the new business the MG Car Company, confirmed the acquisition in a brief statement issued at lunchtime today.
It read: "Alchemy is pleased to announce the impending launch of the MG Car Company following today's outline agreement with BMW to acquire Rover Group.
"The new company will continue with Rover's current model range of the 25, 45, 75 and old Mini and will provide on-going services to Rover customers.
"The new company will focus on development of a state-of-the-art British-built product range worthy of the sporting heritage of the MG name."
Longbridge has been producing the 25 and 45 and was due to launch the millennium Mini later this year. The 75 is produced at Cowley.
Sir Ken Jackson, general secretary of engineering union the AEEU said: "Alchemy will have to demonstrate their commitment to the loyal workforce. The next stage is to sit down with Alchemy to discuss their proposals."
Sir Ken said the last few years had "shattered" the confidence of the Rover workers and Alchemy would have to restore the trust that had been lost.
He added: "I am certain the Government will offer the new owners the financial support they will need and we will play our part in this partnership."
Bill Morris, general secretary of the Transport and General Workers Union, said: "We very much regret the decision to sell off parts of Rover and we are now urgently trying to meet with Alchemy."
John Power, a former Lord Mayor of Oxford who spent 21 years working at Cowley, said he was elated that BMW had decided to hold on to the Rover works and switch production of the new Mini to the city.
Speaking outside the main gates to the vast site in east Oxford he said: "I'm obviously delighted with this decision and delighted for the workforce and the city as a whole.
"It's the right decision. We make quality cars in Oxford, have a long history of doing so and that will be maintained."
But Albert Bore, leader of Birmingham City Council, described the news from Munich as devastating.
He said: "I can't believe that these decisions have been taken and that Longbridge is being, in a sense, cast to the wolves."
Mr Bore forecast that if Longbridge, which employs 9,000 workers, were to close it would see the city's unemployment rate rise from 9% to at least 12%.
At Longbridge's Gate Q, two assembly line workers who emerged from the plant just moments after the deal was announced, told of anger among workers as the news filtered through to the factory.
Chris McDonald, who has worked at the plant for 15 years, said he was "disgusted" with BMW.
He said: "They have come in through the front door and walked out of the back door with all the money. They are burglars.
"Is this all the thanks we get? I started my shift at 5am today, but this is the thanks that we get for working so hard. I've got to go home now and tell my girlfriend, who is five months pregnant. What am I going to tell her?"
His colleague, Geoff Caulkin, was equally angry. He said: "I have got a mortgage and three kids. I have been here 21 years and I can't believe what has happened today."
Mr Caulkin said: "I hope that they keep it open. There is still a bit of hope for the West Midlands. I hope there is some kind of future left for us."
Later, Tony Woodley, TGWU chief negotiator, said Prof Milberg had told him that Land Rover, too, was to be sold off.
Mr Woodley said the BMW board had said it had lined up a purchaser for Land Rover who was a "main player in the car industry" but BMW was unable to confirm or deny this.
Geoffrey Robinson, the former Paymaster General, one-time chief executive of Jaguar and Labour MP for Coventry North West, said the blame for Rover's plight lay with BMW.
"I believe that they should make good their commitment to Rover and put in the real resources of German engineering which have made such a glittering success of BMW itself," Mr Robinson told BBC Radio 4's The World at One.
"They know perfectly well what needs to be done.
"It's not an issue of the exchange rate, though that's certainly unhelpful.
"The fundamental issues are the productivity and the quality of the Rover factories and the products they produce, and there BMW quite clearly have not put in the efforts that were required to do the job.
"They have made big losses, they have only got themselves to blame for that. They have not improved productivity. Look at what Nissan have done up in Sunderland.
"It can be done, if they put in the necessary resources to do it. BMW is second to none for its quality, its marketing and its flair. None of that has been transferred to Rover.
"It does suggest they haven't given it their best shot, absolutely."
Mr Robinson was sceptical about Alchemy's potential role.
"I believe ... that any management buy-out with venture capital funding ... it would be a most hazardous route for any group to go down," he cautioned.Reuse content