Ford grabs Land Rover as BMW blames euro uncertainty

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The Independent Online

Land Rover is to be sold to Ford for three billion euros (about £1.85 billion) in a deal sealed with present owners BMW last night, it was revealed today.

The news, delivered at a press conference at BMW headquarters in Munich, follows the company's announcement of the sale of Rover cars yesterday.

BMW chairman Prof Joachim Milberg blamed the decision to sell Rover on the strong pound, falling sales and the British Government policies on the exchange rate and whether or not to join the euro.

He pledged that a new Rolls-Royce plant would be built in Britain at a location to be decided by the end of this year.

Explaining the decision to sell Rover, he said: "One reason was the policy of the British Government which made the situation at Rover even more of a problem, due to the ongoing debate on the exchange rate, of sterling and the question of whether Britain will join euroland."

If Britain had joined the euro, it would have had a "very positive" effect on BMW's decision whether or not to continue with Rover, said Prof Milberg.

Union leader Bill Morris welcomed Ford's decision to buy Land Rover as a "bold" move.

Mr Morris, general secretary of the Transport and General Workers Union, said he would have preferred the entire Rover group to stay united with one owner.

"We are confident that Ford have the experience to maintain Land Rover as a best in class vehicle. Land Rover and Ford are a good fit - a quality product to a quality company."

The Land Rover name will fill a niche in Ford's growing portfolio of car marques.

The American giant - the world's second biggest car-builder after General Motors - is no longer simply a maker of the family saloons that forged its name both here and in the United States.

It boasts four luxury brands in its stable - Jaguar, Aston Martin, the American Lincoln marque and Volvo, which Ford bought in a £3.7 billion deal in March last year.

At the time of the Volvo acquisition, Ford chief executive Jac Nasser said his company wanted to boost its luxury car output from 250,000 in 1998 to 750,000 this year.

"Our aim is to grow the company in luxury segments," said Nasser at the time, adding that the Volvo deal would benefit the company by "economies of scale".

The sales target will much more easily be reached as Land Rover and Range Rover arrive under Ford's famous oval blue badge, where they are likely to join the other four luxury names in Ford's new Premier Auto Group.

Ford has not been strong in the European off-road and luxury utility vehicles - so beloved by the wealthy urban family for the school-run and supermarket trip - so Land Rover will add a complementary arm to its range.

National and regional union leaders will meet in the West Midlands later today to discuss the Rover sell-off and decide their next move.

The revelation that the profitable Land-Rover business is to be sold off as well as the loss-making Rover cars division, prompted accusations of asset-stripping from Government sources.

Union leaders met Tony Blair to protest at BMW's move and Stephen Byers, the Secretary of State for Trade and Industry, held talks with the venture capital group Alchemy, which is taking over the Rover cars business, to seek reassurances about its plans for Longbridge.

Earlier, the Cabinet had discussed an emergency aid package for the West Midlands amid fears that tens of thousands of jobs will be lost at the plant and among component suppliers.

Mr Byers, who has come under fire in the Commons for his handling of the crisis, warned workers at the Longbridge plant that he did not want to "raise false hopes" that Alchemy will be able to save all the jobs at Rover.

Jon Moulton, the managing partner of Alchemy, said it would retain a "significant" workforce at the plant but added that clearly there would need to be job losses running into thousands. "Longbridge will be reduced in size but not closed. We are not asset strippers" he added.

Alchemy, which has only been in existence for three years, plans to rename Rover the MG Car Company, maintain production of its existing cars and develop a new model at Longbridge. But production volumes of the new car will only reach 50,000 to 100,000 compared with the 300,000 cars the plant produces at present.

There was growing scepticism about whether Alchemy could maintain Longbridge as a viable car plant. Industry analysts said that it needed a partner while the unions were even more dismissive.

Tony Woodley of the Transport and General Workers Union, said: "Alchemy is a company with no track record. I find it difficult to believe that they have the finance in the medium and long term to keep this car plant open. Therefore if these proposals are not changed, Longbridge has no future."

Angry Longbridge workers vented their fury as they left work yesterday, describing BMW as "scum". Production was halted and will resume this morning.

The decision by BMW to sell off Land-Rover, which includes the Range Rover, Discovery and Freelander brands, stunned the industry. Professor Joachim Milberg, the BMW chairman, told union leaders that it had lined up a purchaser who was a "main line player in the car industry".

Mr Moulton said that Alchemy itself had been approached before Christmas about buying Land-Rover but could not afford the £1bn plus the business would fetch. Analysts believe that the cash-rich Ford, which has no real presence in the 4x4 market, is the most likely buyer.

The dramatic disposal of Rover also caused ructions in Germany. BMW has taken a £2bn charge to cover the costs of pulling out of Rover, plunging it into loss of £1.5bn for the year. Three main board directors also resigned.

Mr Byers was privately criticised by Labour backbenchers for failing to apply more pressure on BMW to stick to its agreements. He rejected Tory demands for his resignation but confirmed that the Government's £152m aid package for Rover had lapsed.

The Cabinet was dismayed by the way that BMW carried out its sell-off and the failure of the DTI to pick up the warning signals. Margaret Beckett, the Leader of the House and a former trade secretary, made it clear that the Cabinet did not want to do anything that would put at risk jobs at Longbridge by attacking BMW.

The Cabinet discussed emergency action for the region, including retraining, to soften the blow of mass redundancies.

Downing Street and Mr Byers said they were "disappointed" but the anger clearly felt by the Government was revealed by Geoffrey Robinson the former boss of Jaguar when it, like Rover, was part of British Leyland. The former paymaster-general accused BMW of reneging on their promises and "cherry picking".

Confirming the sale of Land Rover, Mr Byers said: "I am sure there will be a lot of interest by other car manufacturers in its acquisition."

He added: "Today's announcement by BMW is regrettable. It is a great disappointment. It creates uncertainty for the workers of Rover, their suppliers and their families. We must ensure these people have opportunities and are given some hope for the future."