Rover cash `not fair'

German rival condemns proposed pounds 200m of state aid for BMW's ailing UK subsidiary

THE chairman of Porsche, Wendelin Wiedeking, is protesting to Brussels about the British Government's proposed pounds 200m subsidy for Rover.

Mr Wiedeking is writing to Karel van Miert, the EU Competition Commissioner, to complain about government subsidies for car production - whether in Britain or Germany - which he believes fly in the face of fair competition.

"The car industry should not receive one penny more," said Mr Wiedeking. "If Opel gets DM87m (pounds 30m) for its Kaiserslautern plant, if Daimler-Chrysler gets DM218m for its Ludwigsfelde plant and BMW receives more than DM500m for Longbridge, I ask myself where this is all leading."

Mr Wiedeking is one of Germany's most respected business leaders. He was widely tipped to become the new head of BMW earlier this year, until he insisted he had no intention of leaving Porsche. Porsche, still controlled by the Porsche family, is the largest independent car manufacturer in Europe.

"Porsche has a clear competitive disadvantage compared with the giants of the industry, who claim to have the advantages of scale needed to survive in global markets. But they get subsidies and we do not," Mr Wiedeking said.

Under Mr Wiedeking, Porsche recovered from losses during the early 1990s thanks to the introduction of just-in-time production methods. He then masterminded the launch of the phenomenally successful Boxster roadster. But despite this success, Porsche remains a tiny niche producer.

Mr Wiedeking pointed out: "Jaguar, our direct competitor, received DM220m in subsidies, although it is owned by Ford, possibly the world's richest company, with a cash mountain of $24bn [pounds 15bn].

"We want to ask Mr van Miert to guarantee that we are allowed to compete fairly with the automotive giants."

Mr Wiedeking's criticism comes at a crucial time. BMW's expected application for pounds 200m in grant aid for Longbridge is likely to be supported both by Brussels and London. Government money will be matched by EU funds. The size of the subsidy reflects British concerns about the importance of Longbridge for jobs in the British motor industry.

Stephen Byers, the Secretary of State for Trade and Industry, last Thursday reaffirmed that the Government will do "all it can to financially assist" Rover's Longbridge plant, which currently employs 14,000. Mr Byers said: "Provided we have improved productivity and we can raise skills and also that BMW itself is prepared to make a substantial investment in Longbridge, then the Government will do all that it can."

BMW itself expects to announce a pounds 1.7bn investment in a replacement for the Rover 200 and 400 at the Geneva Motor Show. While Longbridge is the preferred site for the investment, it depends on the subsidy being forthcoming. Otherwise, BMW could produce the new car in Hungary.

Even if Longbridge is saved, the workforce looks set to fall sharply. Both the new Mini and the new Rover will be easier to produce and far less labour-intensive.

To save the plant, union leaders are thought to have accepted that the workforce will shrink to around 7,000 by 2004. Some 1,500 employees will move to a new motor factory at Hamms Hall, Birmingham, next year. Currently Longbridge employs 4,000 on engines, but Hamms Hall is more efficient.

After diving sales at the beginning of the year, Rover has some cause for cheer. The motoring press in Britain and Germany has, by and large, acclaimed the new Rover 75.

The Frankfurter Allgemeine Zeitung newspaper said: "The Rover is the right car for Europeans who always wanted a Jaguar, but never dared. It is the product on which the brand will have to be built if it is to have any future at all."