View from City Road: Cash sparse for the new Roller

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FORD has spent between pounds 3bn and pounds 4bn on launching the Mondeo, which is just about to go on sale in Britain. That breathtaking sum is in a category all of its own, but even hard-pressed British Aerospace spent pounds 200m on launching the Rover 600, which goes on sale later this year. So why does Vickers think it can launch a new Rolls- Royce for just pounds 100m?

The truth is, it has little choice. The pounds 60m rights issue launched yesterday will merely repay debts stacked up in the recession. It will do little to secure the long-term future of the luxury car maker. Cash will still go out of the group, unless it secures some hefty defence orders, with money up- front, or sells sizeable parts of the group.

That leaves unresolved the question of how to fund a much-needed new model for Rolls-Royce. Sir Colin Chandler says the problem will not arise for three years, after which the group should be in better shape. But this means Rolls may be left behind by its competitors.

Even the pounds 100m would have to come through a partnership with another car manufacturer, such as BMW or Toyota. And it would still not buy an entirely new model but merely a patchwork of bought-in components - the chassis, say, from BMW, the engine from someone else and the gearbox from a third supplier. Rolls's much-slimmed- down operation at Crewe would presumably still supply the bodywork, the leather seat covers and the walnut dashboards.

As a result, Rolls cars risk losing their premium and Rolls-Royce its potential value. Whatever the short-term attractions of the rights issue - and they are enough to merit support - it has done little to address the long-term concerns.

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