The Rover Takeover: Car-making tradition dies with BMW deal: The Industry: End of British-owned volume production

Michael Harrison
Tuesday 01 February 1994 00:02 GMT

FOR THE sentimental, yesterday will be remembered as the day when the sun finally set on the British motor industry. BMW's pounds 800m takeover of Rover means that, for the first time in 112 years, Britain no longer boasts a British-owned volume car maker.

In that respect the deal also sets Britain apart from its major partners in the EU. Germany has Volkswagen, Audi, Mercedes Benz and BMW. Italy has Fiat and Alfa Romeo and France has Renault and Peugeot-Citroen.

But in Britain the indigenously-owned car industry now consists of a collection of very small, specialist manufacturers such as Morgan and TVR.

BMW's acquisition of Rover from British Aerospace also marks a further step on the road towards a Europe in which the motor industry may be dominated by as few as four giant manufacturers.

The rationalisation of the European motor industry has seen a number of smaller players snapped up by larger groups. Saab of Sweden is 50 per cent owned by the world's biggest car maker, General Motors of the US, while Spanish manufacturer Seat is part of the VW empire.

But nowhere has the process of consolidation been more stark than in Britain. Before yesterday's announcement, Jaguar and Aston Martin had both been bought by Ford and Lotus by GM.

Realistically, Rover was no longer a volume car maker compared to VW, Fiat or Renault. Although it produced 440,000 cars last year, its share of the UK car market had shrunk from more than 30 per cent in the late 1970s to 13 per cent last year as it was buffetted by changes in name and ownership and the onslaught of the Japanese manufacturers.

Britain is forecast to produce 1.45 million cars this year - its highest output since the early Eighties. But the reason for the renaissance lies mainly with Japanese companies.

Today, Nissan will disclose that its Sunderland plant was Britain's top car exporter last year. By the end of the decade Nissan and its two compatriots, Toyota and Honda could be producing as many cars in Britain in their transplant factories as Rover and Ford combined.

The rise of the Japanese owes much to the inefficiencies of the British car industry in the Seventies and Eighties combined with much lower levels of protection from imports than those enjoyed by the French and Italian car makers.

But there was also an element of arrogance. 'After the war the British motor industry had Europe to itself,' said Rob Golding, a motor industry analyst for SG Warburg Securities.

'Britain was regarded as the saviour of Europe and everyone wanted to buy our cars. But the opportunity was squandered because we failed to see what the

Japanese, for example, saw - that what people wanted was reliability.'

George Simpson, chairman of Rover, dismissed fears that the BMW takeover would lead to a further dismantling of the UK car industry, describing it as an 'historic occasion'.

Rover's product range will be extended under BMW's ownership and production volumes increased.

'The motor business is very much an international business these days,' Mr Simpson added.

'It is very difficult to be efficient if you take a nationalistic approach. What we have announced today increases Rover's security and that is very important.'

Bernd Pischetsrieder, the BMW chairman, meanwhile emphasised that Rover would remain independent, its identity and model range protected and promoted separately.

Assuming BAe's shareholders approve the sale - a formality given that they are being paid pounds 800m for an asset bought for pounds 150m - and provided the European Union's competition authorities give it the green light, nothing stands in the way of a successful takeover.

Except, that is, the two car makers themselves.

The last decade is littered with the bodies of car industry mergers that have gone disastrously wrong. Ford bought Jaguar in haste for pounds 1.6bn in 1989 and has spent the last five years repenting at its leisure, as the luxury car maker's losses mounted and the grand vision to take Jaguar production to 150,000 receded further into the distance. VW has had to take a DM1bn (pounds 400m) write-off on its acquisition of Seat.

The marriage of Renault and Volvo meanwhile ran off the road somewhere between the church and the reception after a clash with the Swedish car maker's own directors and shareholders.

(Graph omitted)

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