Dr Walter Hasselkus, an Anglophile, aesthete and Latin scholar, said he was resigning after just two years in the job because "someone had to stand up and be counted" over Rover's mounting losses.
The announcement came as BMW confirmed that it will invest pounds 400m to build the new Mini at Longbridge. The investment follows union agreement on a ground-breaking labour flexibility, deal that will save Rover pounds 150m a year, result in 2,500 job losses but safeguard the future of Longbridge.
BMW is funding the new Mini, due to go into production in 2000 at a rate of 150,000 cars a year, out of its own resources. But Bernd Pischetsrieder, chairman of BMW, warned that a further pounds 1bn investment in a replacement for the Rover 200-400 series would depend on taxpayers' support to help it match "unfair competition" from Rover's subsidised rivals.
A spokesman for the Department of Trade and Industry said no negotiations had begun with BMW and no aid application received. When one arrived it would be dealt with in the normal way.
Since BMW took over Rover five years ago it has invested pounds 2.5bn but losses this year are expected to reach at least pounds 600m, mainly because of the strength of the pound and Rover's inferior productivity.
Mr Pischetsrieder said the new union agreement would not enable Rover to close the 30 per cent productivity gap with BMW's plants in Germany and hinted that it may need to transfer more component purchasing abroad.
Rover is already switching pounds 1bn worth of orders from UK suppliers on to the Continent.
Dr Hasselkus, 58, is taking early retirement and is being replaced by Professor Werner Samann, 56, who previously ran BMW's engines and transmission's division and is regarded as more of a hard-nosed cost cutter.
During Dr Hasselkus's reign, Rover introduced the new baby Range Rover, the Freelander and R75 executive car and also took on the sponsorship of the London Symphony Orchestra.
He announced his departure at a press conference tinged with emotion and humour and laced with Latin quotations. Asked whether he had jumped or whether he had been pushed, Dr Hasselkus replied:
"I jumped, I don't like to be pushed."
He then added with a chuckle: "Hic Rhodes, hic salta" (Here is Rhodes, here I jump).
The quotation is a reference to the Greek legend about a man who was always boasting he could jump from one island to another until one day he was challenged to perform the feat.
Dr Hasselkus spent four years as the head of BMW's UK sales operation in the early Eighties and came into the Rover job from heading its motorcycle division. He is a keen motorcyclist.
"Having pondered the situation very carefully and discussed it with Bernd, I have come to the conclusion that somebody else, somebody who is a real expert in engineering and technical areas would be better suited to run Rover."
Although the strong pound was Rover's biggest problem, he said he had got it wrong by not anticipating how fiercely competitive the UK car market would be. "When I look around 360 degrees at the end of the day I have to look at myself. I feel very strongly somebody has to stand up and be counted."
Under the new labour agreement, Rover's 37,000 staff will move to a 35 hour week, but overtime will end and pay rises for the next two years will be sharply reduced.
Employees will vary their shift patterns, working longer hours when demand is high and fewer hours during slack periods of the year. Each employee will have a working time account in which they can "bank" up to 200 hours a year.
Union leaders welcomed the deal. Tony Woodley, national secretary of the Transport and General Workers, said the new agreement had saved 50,000 jobs in the West Midlands.
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