BMW's Takeover of Britain's Rover Has Its Share of Supporters, Critics

Some see an auto powerhouse; others fear for jobs, lost national asset

THE takeover of Rover, the last British-owned volume carmaker, by Germany's BMW will create what promises to become a formidable automotive manufacturer.

Although industry analysts say the deal, announced Jan. 31, is part of an unstoppable trend toward integration in car production, it is creating an uproar among Rover's 30,000 workers. They are concerned that their jobs are at risk.

Supporters of the British government also have expressed unease at the takeover. Claiming that Rover is a British national asset, they fear that future strategic decisions affecting production will be made in Germany.

BMW is to pay 800 million ($1.2 billion) for an 80 percent stake in a company that Garel Rhys, head of the Cardiff Business School, says is currently ``a world leader'' in the small-car business. The takeover will create a company with 100,000 employees worldwide and a comprehensive range of cars.Executives of Japan's Honda car company, which owns 20 percent of Rover, say they are dismayed that British Aerospace, the parent company, sold the Rover group to BMW. Honda had been negotiating with British Aerospace to raise its stake in Rover to 50 percent. The Japanese company will probably have to revise its global marketing strategy in the light of British Aerospace's preference for the BMW bid.

Mr. Rhys says the purchase fits into BMW's long-term strategy of seeking access to the small-car market while continuing production of its medium-size, executive and luxury models. He forecasts that BMW-Rover will be able to mount ``a determined assault'' on the car market in North America. BMW, he says, will concentrate on more expensive cars, leaving Rover to produce cheaper, smaller models.

BMW'S acquisition of Rover, which manufactures the Land Rover and Range Rover, means that it will be able to challenge Japanese and American companies already successfully making four-wheel-drive vehicles.

BMW has a highly developed dealer network in the United States and will likely use it to market Rover models there. It is also expected to use the network to sell Rover's range of small cars, thus stealing a march on Mercedes Benz and Audi, its rivals in Germany, whose planned small-car models are still at the designer stage.

The deal will double BMW's share of the European car market to around 7 percent, industry analysts calculate. Tim Sainsbury, Britain's industry minister, claims that the deal will be ``good for Britain'' and ``create new opportunities'' for Rover. But Robin Cook, Labour opposition transport spokesman, says it is ``a rip-off and a cheat to the taxpayer.''

In 1988, the British government sold Rover, then a state-owned concern, to British Aerospace for 150 million. Mr. Cook says he wants to know why the company was sold off so cheaply then. He also is asking why BMW's purchase of Rover was done in total secret.

Bill Jordan, president of the Amalgamated Engineering and Electrical Union, says government claims that the Rover sale will bring nothing but benefits are dubious, noting: ``Britain no longer owns its own car industry, and that cannot be good.''

``Most of the components in Rover cars are made in Britain,'' adds Sir Kenneth Warren, chairman of the House of Commons industry committee when it was sold to British Aerospace. ``I fear that BMW will want to use German-produced components, meaning the loss of many British jobs.''

A. G. Bernd Pischetsrieder, BMW chairman, says he plans to boost investment in Rover. Existing plants at Longbridge near Birmingham, as well as Cowley near Oxford, will stay open, he says.

In acquiring Rover, BMW is getting a good deal, industry experts say. The German company's production fell by 9 percent last year to 534,000 cars. Rover recorded a 10 percent rise to 442,000 vehicles.

Rhys says Rover is being sold just when British Aerospace could have expected big benefits from the investments it has made in the company in the last five years. But he describes British Aerospace as ``short of cash.'' The sale of Rover will sharply decrease its indebtedness.

You've read  of  free articles. Subscribe to continue.
QR Code to BMW's Takeover of Britain's Rover Has Its Share of Supporters, Critics
Read this article in
QR Code to Subscription page
Start your subscription today