End of the road for Rover

German automaker BMW announced plans today to sell off its money-losing Rover car unit in a restructuring deal setting the company back 3.15 billion euros (£2 billion).

The company's Rover and MG brand cars, as well as their plant in Longbridge England, will go to British investment group Alchemy Partners Ltd., BMW announced in statement released after the company's supervisory board met to approve the plan. The company said it was still negotiating a price to the deal.

BMW was expected to shed Rover's passenger car division, while keeping its "crown jewels" - Rover's four-wheel drive division, Land Rover. But British media reported Thursday afternoon that division was also on the bloc, but notnecessarily going to Alchemy. BMW, however, denied it planned to get rid of Rover.

The report originated with union leaders representing Rover workers, who said BMW management told them they were trying to sell the pricey, but popular sport utility vehicle brand as well, according to Britain-based Press Association.

It reported that union members met with BMW chairman Joachim Milberg immediately after the supervisory board meeting to lobby for saved jobs.

Alchemy said it had not heard about any plans to sell Land Rover.

According to BMW spokeswoman Christine Trepold, the dlrs 3 billion one-time restructuring charge includes the cost of shifting Rover and MG auto production over to Alchemy.

"There are still ongoing negotiations. We are awaiting a positive result but we can't say what the selling price will be," Trepold said.

BMW also unveiled plans Thursday to roll out a new line of Minis from its Oxford plant in early summer 2001 and continue building the Rover 75 luxury model in Oxford on a contract basis for Alchemy. The company also plans finish construction of its new Hams Hall engine factory in Birmingham and begin production there.

Alchemy said in a press release that it would take on manufacturing of the Rover 25, 45 and 75 models and continue production of the "old Mini," presumably at the Longbridge plant, near Birmingham.

The proposal to shedas already filled two of those spots, with the third being shared by Chairman Joachim Milberg and chief financial officer Helmut Panke.

The Rover line - headquartered in Warwick, central England - was bought by BMW in 1994 mainly to gain access to Rover's popular sport utility line and flesh out BMW's models at the less-expensive end of the car market. BMW has already pumped dlrs 3.4 billion into Rover since buying the group for dlrs 1.2 billion.

The strengthening of the British pound since 1997 has made it more expensive for the German company to build Rover vehicles in Britain and export them to other countries in Europe where it earns revenues in weaker currencies.

Plans to phase out older models and delays in launching new ones, coupled with poor sales, have bruised Munich-based BMW's bottom line, dragging profits down 28 percent in 1998. Last year, Rover sales fell 26 percent, and are already down an additional 10.3 percent in the first two months of 2000.

Worried about BMW closing down plants or pulling out operations, the British government has earmarked a 152 million pound (dlrs 240 million) subsidy for the company. The European Union Commission is currently investigating to see if the plan violates EU competition rules.

British Prime Minister Blair told the House of Commons on Wednesday that "we will do everything we possibly can, including making good our offer of support, to safeguard the future of the plant."

Without the subsidy, union leaders say 16,000 of Rover's 30,000 jobs could be at risk.

Unions in Britain and Germany reacted cautiously to Thursday's announcement.

"We will discuss Rover with anyone who is serious about securing the company's future," said Ken Jackson, general secretary of Britain's Amalgamated Engineering and Electrical Union.

"Alchemy will have to demonstrate their commitment to the loyal workforce," he said. "The next stage is to sit down with Alchemy to discuss their proposals."

Meanwhile, Germany's IG Metall said BMW had few alternatives to selling off Rover, with Werner Neugebauer - Bavaria's IG Metall boss and BMW supervisory board member - saying it was a simple matter of adding up the balance sheets and seeing that Rover could not keep going.

Neugebauer acknowledged that layoffs cannot be ruled out after the deal, and criticized the British government for not doing more to suppress the value of their strong currency.