Leading Article: Rover's dowry; BMW's duty

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PUBLIC reactions to BMW's unexpected takeover have been less shrill and chauvinist than they would have been a few years ago - and probably more muted than they would have been in Bavaria had Rover taken over BMW. It is none the less clear that who owns British manufacturing industry still matters.

Britons may have become resigned to American and Japanese domination of motor manufacturing in this country. We have long been adjusting to the globalisation of trade, the internationalisation of manufacturing and finance, and the disappearance of obstacles to mergers between European companies. Yet when the last substantial British motor manufacturer falls to a foreign rival, the hurt cannot be concealed. The wound to pride throbs the more painfully when the company had begun to perform so well (albeit largely thanks to partnership with Honda) - and when its long history arouses so much nostalgia for models past.

Notionally a company belongs not to its directors, of whatever nationality, but to its shareholders. The larger, institutional investors, such as holders of pension and life insurance funds, can and do intervene in the affairs of the companies whose shares they own. For example, it was British Aerospace's chairman, Sir Roland Smith, who secured Rover for BAe at a knockdown pounds 150m. But institutional shareholders helped subsequently to topple him. The institutions' concern is normally with the make-up of the board rather than with strategic decisions: though if their interests are affected by these, a wise board consults them.

With that qualification, it is the directors who call the shots. A disappointing aspect of multinational companies is that the board rarely reflects the geographical range of the company's production. Shell and Unilever, both Anglo-Dutch concerns, are exceptions; and it is true that Britons are chairman and chief executive of both Ford and the bankers J P Morgan in the US. More normally, directors are nationals of the country in which the company's headquarters are sited, however global its operations.

Given all that BMW will be gaining from Rover - including control of Europe's best manufacturer of four-wheel-drive vehicles, access to Europe's most successful applier of Japanese production and engineering methods, and an inexpensive method of entering the important small-car market - BMW and its controlling Quandt family should consider the creation of a genuinely German-British company on the Shell precedent.

Such a structure would be in keeping with the new Europe, and would better reflect the great assets that Rover brings with it. At the same time, links with the community in the West Midlands should be preserved. Something dies when international managers are dispatched from a head office far away, even from London. York experienced this drop of involvement when Nestle took over Rowntree, and Birmingham has seen several major companies move senior executives to London. If BMW chose to follow these twin paths, it would be pioneering something of more enduring value than new models.

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