Ministers were kept in the dark on threat to Rover

BMW board are said to be split over what to do with car plant
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The Independent Online

The Government was kept in the dark by BMW about the dramatic break-up of Rover until the eleventh hour. But it was in good company. Even senior BMW executives were caught wrong-footed when news began to leak out of Munich that the German car maker was finally about to give up on its "English Patient" and withdraw the life support.

While there was uproar in the Commons yesterday and consternation in the West Midlands, the picture emerging from Bavaria was of a BMW board still deeply split over whether to jettison Rover despite the fact that the car maker is now losing more than £2m a day. There are even doubts about whether the BMW chairman, Professor Joachim Milberg, will carry the supervisory board with him this morning when he tables his radical plan to dispose of Rover's volume car business, putting the giant Longbridge car plant and 50,000 jobs at risk.

Certainly, there was no inkling in Whitehall that the situation was this grave. For the past six months the Department of Trade and Industry and BMW have been in constant contact, working hand in glove to persuade the European Commission that a £152m aid package for Longbridge, linked to a £1.7bn investment in a new medium-sized saloon, complied with EU rules.

Even after BMW confirmed on Tuesday night that the disposal of Rover was "one of the conceivable variants" to be discussed at today's board meeting, senior government ministers remained in denial. One asserted that BMW only intended to get rid of some peripheral Rover businesses.

By yesterday afternoon that confidence had evaporated. Stephen Byers, Secretary of State for Trade and Industry, contacted both the chairman of Rover, Werner Samman, and Professor Milberg to urge BMW not to abandon Rover but show the same level of commitment as the Government and the workforce. A union delegation, led by Tony Woodley of the Transport and General Workers, flew to Munich yesterday to reinforce the message, but it looked ominously like a waste of plane tickets.

What has finally forced the hand of BMW remains unclear. But certainly a combination of Rover's escalating losses, the further strengthening of the pound and delays in securing EU approval for the Longbridge aid package have not helped. One BMW executive said yesterday: "I think it was the realisation that whatever we did, the problems of Rover are just so insuperable that it will never make a profit."

Those comments are in stark contrast to the upbeat message Professor Milberg spelt out just a fortnight ago when asked about Rover at the Geneva Motor Show. He dismissed renewed speculation that Rover might be closed down or sold to Volkswagen as "general, vague, inconsistent and contradictory". The BMW chairman went on to re-affirm that Rover remained a core brand within the BMW group and enthused about the model roll-out he planned. The future of Rover, he said, lay in producing more cars like the 75 executive saloon.

What is it that forced Professor Milberg to alter course so violently? One theory is that the Quandt family, which controls 48 per cent of BMW shares, finally lost patience with Rover. Another is that Professor Milberg's hand has been forced by a group of powerful non-executive directors who have always doubted the wisdom of buying Rover.

Certainly Rover has been a problem child for BMW ever since it stunned the motor industry by forking out £800m in 1994 to acquire it from a grateful British Aerospace. Since then it has gone through three different Rover chairmen and sunk £2.5bn into the company, only to be rewarded with ever mounting losses.

It is no surprise that whilst the loss-making volume car business is being cast off, BMW intends to hang onto Land-Rover and probably also the new Mini. Production of the Mini could be switched to Solihull. But for Longbridge, the future looks grim indeed.