The Independent has learnt from Hungarian officials that senior BMW managers held discussions with officials of the country's Ministry of Industry more than a month ago. They were said to be particularly interested in an area near Audi's highly successful engine plant in Gyor, western Hungary.
The news came as BMW confirmed that it had put in applications to both the British and Hungarian governments for state development aid for the new model to replace the Rover 200 and 400 series. BMW put in a bid for about pounds 200m for the Longbridge plant in the West Midlands to Stephen Byers, the Secretary of State for Trade and Industry, which officials said was being considered carefully.
The German car company insisted that Longbridge was still its preferred location and tried to play down ideas of a subsidy auction.
A BMW spokesman in Munich defended the company's demand for help from the taxpayer. It is customary that the state provides subsidies to car- makers in an attempt to lure them in, said Jurg Dinner. "We don't want any special treatment. All we want is what our competitors are receiving in the way of inducements." He said BMW was adamant that Rover's future lay in Britain.
This view was supported by Helmut Punke, BMW's industrial relations director, who said there was a "prejudice" in favour of basing the new car there. He said "tremendous progress" made at the Birmingham plant meant it was a "very viable proposition", adding that the Hungarian option was a "serious alternative".
"Of course there's an emotional and practical prejudice towards keeping the manufacture of Rover products within the UK," he said. "I think we can admit that the tremendous progress that has been made within the Rover manufacturing organisation makes us quite confident that together we will have a very viable proposition for production in the UK."
Asked how much money BMW wanted from the Government, he said he just wanted "the same rules" to apply to BMW as had been applied to other car firms, such as Jaguar.
To receive European Commission approval for state aid, the recipient must demonstrate there was an "economically viable alternative location". It is understood BMW believes its case for UK aid is strengthened by considering Hungary as it would mean the multi-million pound investment going outside the European Union.
However, Hungary could be a highly competitive option for BMW. Audi said it was attracted to Gyor by a skilled, flexible workforce at the cost of between one-fifth and one-sixth that of German workers, the absence of restrictive labour laws and the fact that it was German-speaking and close to the border.
The BMW board is to make a decision in two weeks. It is aiming at the crucial small family car market by launching, later this year, revised versions of the slow-selling Rover 200 and 400 models. Codenamed Jewel and Oyster, these will have major changes, such as new axles and suspension.
The investment is vital to the long-term survival of Longbridge. It could secure up to 40,000 jobs and support the factory's case for building a new range of family saloons. Rover has already agreed 2,500 voluntary redundancies with unions as part of a package of measures to save pounds 150m a year.
Yesterday, Mr Byers announced that the Government was to give Peugeot grant aid of pounds 2m to help to create 900 new jobs at its British base.
Rover is to close its car component plant in South Wales, despite a campaign by politicians and unions to keep it open. Forty-four workers will lose their jobs when the factory in Bargoed, Mid Glamorgan, shuts next month. A company spokesman said it was closing because of changes in "strategic requirements".
Nissan in merger talks,
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CAR WORKERS ACROSS THE EUROPEAN DIVIDE: HOW THEY MEASURE UP
THE LONGBRIDGE WORKER
Location: Birmingham, West Midlands, UK
History: Founded in 1906 by Herbert Austin. Produced 329,709 vehi cles in 1997
Average salary: pounds 16,000
Average age: 44
Working week: 37 hours over four days
Workforce: 14,000 (to fall by 2,500)
Overtime: none available (see below)
Working under flexible working agree practices: ment, managers can `bank' hours by paying e.g. four days pay for a two-day working week in quiet periods and then with draw the spare hours from the `bank' in busy periods without paying overtime. In manage ment-speak this is known as `flexibleworking time account'.
Holidays: five weeks a year plus statutory days
Other benefits: company pension scheme. Pa ternity and maternity leave. On- site creche and training centre
Productivity: 33 vehicles per employee
Loaf of bread pounds 0.88
litre Coca-Cola pounds 1.15
20 Malboro pounds 3.28
Colour TV pounds 500
3-bed flat pounds 450
Hotel, per night pounds 137
THE HUNGARIAN WORKER
Location: Suzuki plant in Esztergom, northern Hungary, just outside Budapest.
History: began mass production in1992. The factory's target this year is 68,000 vehicles, Suzuki Swifts.
Average salary: 816,000 forints ( pounds 2,232) a year.
Working week: two eight hour shifts, from 7am to 3pm and from 3pm to11pm.
Overtime: if they work on weekends or outside their shift times.
Working statutory 20 days holidays a practices: year, as well as state holidays, such as Christmas, several national days, etc. For every two years worked workers re ceive an extra one day's holiday, rising to a maximum of 30 days a year (excluding national and state holidays).
Other benefits: n/a
Loaf of bread pounds 0.50
Litre Coca-Cola pounds 0.22
20 Malboro pounds 0.67
Colour TV pounds 242
3-bed flat pounds 93.96
Hotel, per night pounds 136
Sources: Rover, Suzuki, Economist Intelligence UnitReuse content