15 Jan 2000 From Peter Goundry [1/2000]:
Top executives of German car maker BMW have for the first time suggested that they may have to close down their UK subsidiary Rover Group because of mounting losses. Mr Heitmann told the newspaper on the sidelines of the Detroit Motor show that he "fears that we won't have the time we need" to re-establish the Rover brand. He estimates that it may take eight to 10 years to do the job. BMW was currently not considering Rover's closure, Mr Heitmann said, but he added: "Nobody can completely rule out this ultimate solution."
Profit target may be missed
When Rover's crisis came to a head in spring 1999, BMW's news boss Joachim
Milberg repeatedly stated that Rover had to get back into profit by 2002.
BMW's group's chief financial officer, Helmut Panke, though, is now dubious
whether this will be possible. He told Sueddeutsche Zeitung that "under
current circumstances" Rover will not make the deadline.
During 1998, Rover made losses of about 1.8bn Deutschmarks (£570m). Mr Panke
said that the 1999 results would show losses that are "rather larger".
Strong pound hurts
Mr Panke blames the strong pound for Rover's troubles. At the beginning of
1999, one pound bought 2.8 Deutschmarks. Because of the weakness of Europe's
single currency, it now takes 3.15 Deutschmarks to buy a pound. This has
made exports of Rover cars less profitable. At the same time, Rover's UK
suppliers have become less competitive. The firm sources about 90% of car
parts in the UK, but they cost 10-15% more than from suppliers on the
continent. Mr Panke said that the situation is getting more difficult "month
by month". He said Rover would have to cut costs even further, by reducing
the number of workers once again and force suppliers to lower prices. During
1999, the company shed 8,000 jobs, 5,000 more than originally planned.
and... Frank Elson [1/2000]:
I've driven all three current Rovers, 25, 45 and 75, this year at their press launches and they are undoubtedly very good and decent cars. In fact the 75 compares very favourably with my all time favourite Rover - the P6. Problem is that the hangover from British Leyland is still there in the UK at least, maybe also in other parts of the world. As vehicles the three, in their various segments can compete with any of the tin boxes on the road today - a large number of which I have driven in my job (in fact, as my job).
I don't know what the answer is, maybe BMW just trying to screw some more cash out of the UK Gov, or maybe they really do need to start cutting back on expenditure. Certainly the three are built in state-of-the-art factories and therefore must be as profitable as any other mass produced vehicle. Two important points tho'
1. BMW bigwigs have continually stressed that profitability per 'unit' sold is what they are after, therefore they will accept less sales so long as the profits are there.
2. Rover Cars is a completely separate division from the other UK BMW-owned
companies. Mini, MG and Land Rover. Therefore it does not follow that any
problems Rover is having would have any effect on Land Rover - which is what
interests us on this [LRO] list.
- Frank