Ultimate task may prove too much for BMW

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The Independent Online
Strange things happen to the profits of British companies when they are piped through the German accounting system. Just ask Rover which, to its bemusement, saw a pounds 92m operating profit turn into a pounds 148m loss last year.

Well here's another set of whacky figures to get your mind around from the same folk who brought you Rover's disappearing profits act. BMW, which paid pounds 800m for Rover in an uncharacteristic display of largess two years ago, wants to increase production at its British subsidiary from 500,000 to 750,000 over the next four years without taking on a single extra fitter. As if that wasn't enough, it also wants to build a plant in the West Midlands that will churn out 400,000 engines a year for the car that will replace the Rover 600 and 800 series.

Even supposing that some staff are transferred from building engines to the more labour-intensive business of bolting together cars, that still suggests a productivity leap of 40-50 per cent. Er, not quite, says Dr Walter Hasselkus, who has just cruised over from Berlin on his BMW1000 motorcycle to take charge at Longbridge. The figure he has in mind for efficiency savings is more like 4 per cent a year. That, according to BMW, would still be world-class but it is a far cry from the improvements implied by its ambitious production targets.

The discrepancy can be explained by the mountain of cash that BMW intends to throw at the old dog to get Rover where it wants it to be in the next decade. The Germans plan to spend a cool pounds 3bn on Rover before they see a single penny in profit back.

The ultimate driving machine has taken on the ultimate task. It plans to replace the entire product line-up and cut the number of basic platforms that Rover and Land Rover use from 11 to seven while overhauling quality standards so that the doors close with a chunk not a clink.

If BMW is ever to make decent profits on such colossal investment it can only mean one thing - that the price of a Rover will start to march smartly upwards. If you think the current Mini is expensive at a shade under pounds 9,000 just wait until you see the new version for the next millennium. The one thing that Rover's customers are not used to is paying top prices for their cars. Convincing them otherwise will be almost as hard a task as knocking Longbridge and Cowley into shape. Certainly it is going to take all BMW's legendary marketing skills.

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