Outlook: German bidders slug it out

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The Independent Online
THE spectacle of BMW and Volkswagen tailgating one another as they roar down the Autobahn in hot pursuit of Rolls-Royce is entertaining for Vickers shareholders if nothing else. Certainly their respective drivers lack neither determination nor ambition.

BMW's Bernd Pischetsrieder had a fit of road rage when plucky little Mayflower threatened to wreck his plans by bidding for the whole of Vickers. Mayflower quickly withdrew after BMW said it would have to find another engine supplier if the bid succeeded.

Meanwhile, petrol, not blood, is said to course around the veins of VW's Ferdinand Piech. Having weathered the Lopez industrial espionage scandal and turned around VW and its other brands including Skoda, Mr Piech fancies his chances at the more rarified end of the market.

For both companies buying Rolls off the shelf is a lot less expensive a proposition than developing their own luxury brands, not to mention the fact that they start with a priceless brand name.

BMW has been in the driving seat in this auction since the beginning and not just because Mr Pischetsrieder has a sentimental attachment to British brand names bordering on the unhealthy.

Whether VW will outmanoeuvre BMW therefore remains to be seen. Its initial interest in Rolls was seen partly as an attempt to make last autumn's ill-judged DM6bn capital increase a more palatable issue for VW shareholders to swallow. VW and Mr "I would pay almost any price" Piech may now simply be driving up the figure that BMW is finally obliged to pay. But do not bet on it. The Piech ambition is every bit a match for the Pischetsrieder passion - he does not own a 50-year old Phantom II by chance.

Faced with a higher bid from VW, the Vickers board would be hard pressed to ignore it, as they have the offers submitted by groups of Rolls-Royce enthusiasts. BMW could always try playing its trump card by getting its aero-engine partner, Rolls-Royce plc, to use its power of veto over the transfer of the brand name. But, again, it would be hard pushed to argue, in the courts or anywhere else, that VW would be less appropriate as an owner than BMW. Vickers shareholders should sit back and enjoy the race.