BMW sell Rover back to the British

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The Independent Online

Venture capitalists Alchemy have bought the lionshare of Rover, which will be renamed 'MG Car'.

BMW announced plans to split from its money-losing Rover unit this afternoon after a closed meeting.

Thomas Gauly, who represents BMW's Quandt family said that the Munich-based automaker's future will be more secure once it is separated from the Rover and MG brands, as well as their plant in Birmingham.

Trade and Industry Secretary Stephen Byers said that he expects BMW to sell off the car unit while keeping the "crown jewels" - Rover's four-wheel drive division and sporty subcompact line.

"Clearly they are going to make a recommendation to the supervisory board today to dispose of what they regard as the loss-making parts of the Rover network in the U.K.," Byers told the BBC.

The proposal to shed Rover apparently caused strife at BMW and led to the firing of members of the management board, according to a report published in the Sueddeutsche Zeitung.

The Rover line - headquartered in Warwick - was bought by BMW in 1994 mainly to gain access to Rover's popular sport utility line and flesh out BMW's models at the less-expensive end of the car market. BMW has already pumped £2 bn into Rover since buying the group.

The strengthening of the British pound since 1997 has made it more expensive for the German company to build Rover vehicles in Britain and export them to other countries in Europe where it earns revenues in weaker currencies.

Rover hopes to increase exports to the United States where it currently sells only its four-wheel-drive Discovery and Range Rover models.

Plans to phase out older models and delays in launching new ones, coupled with poor sales, have bruised Munich-based BMW's bottom line, dragging profits down 28 per cent in 1998. Last year, Rover sales fell 26 per cent, and are already down an additional 10.3 per cent in the first two months of 2000.

Worried about BMW closing down plants or pulling out operations, the British government has earmarked a £152 subsidy for the company. The European Union Commission is currently investigating to see if the plan violates EU competition rules.

Without the subsidy, union leaders say 16,000 of Rover's 30,000 jobs could be at risk.