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The Great BMW-Rover Fiasco

17 March 2000

Andrew Frankl
European Bureau Chief

Even though the ink has yet to dry, the carve up of the once great British auto industry is just about complete.

As predicted by many observers, including yours truly, it was almost inevitable that Rover would prove to be the "English Patient" for BMW just as it has been for British Governments-Tory and Labour alike. Let me illustrate it with an old joke. Longbridge, just outside Birmingham has been a source of industrial strife as long as I can remember. About 25 years ago the union leader was the infamous Red" Robbo" Robinson. He was organizing strikes virtually on a daily basis for all sorts of reasons, often silly ones. According to the joke at one of the strike meeting he stood up in front of thousands of workers to announce "Brothers, I have done a deal with management. From now on we only have to work Wednesdays." Voice from the crowd: what, every Wednesday?! That just about sums up the feel of the place. I've owned three Rovers in successions and all three rusted to pieces under my very eyes. To be fair, management and workers deserved each other- one was as bad as the other. Badly designed , badly assembled cars at inflated prices trading on the once great name of Rover just had to come to a sad end sooner or later.

BMW had a real go at trying to save the company but have just thrown in the towel. Not without a lot of internal strife in Munich I hasten to add. Over five years the German car maker lost literally billions of dollars and some of their top people as a result of their unsuccessful efforts in trying to resuscitate the ailing patient. During one rather eventful board meeting they lost the CEO and his No. 2 and now a year or so later they've just lost another three top directors. Sacrificial lambs if you ask me.

The controlling Quandt family seems to appear like a bunch of headless chicken at present. Certainly the fiasco over Rover has all the hallmarks of major internal wrangling. On the face of it I get the impression that Professor Millberg worked overtime to save his own job as CEO and to recoup some of the losses gave away the jewel in the Rover crown-Land Rover- for peanuts.

The lucky winner-none other than Mr. Opportunity knocks of the automotive industry- Ford's Jacques Nasser! He is really is one smart individual. Whilst GM are messing about with 10 % of Suzuki and 20% of Subaru and now 20% of Fiat, canny Jacques jumps in with both feet waving 3 billion greenbacks and hey presto the de rigeur automobile of Rodeo Drive is his!

During the last five years BMW's brilliant production engineers had an opportunity to fix all of Land Rover's production problems - paint quality to name but one- and now when the Range Rover is as good as it looks Ford buys it! I have a funny feeling that ex-BMW top man Wolfgang Reitzle had a hand in this. He was the No. 2 I was referring to earlier on. He is currently boss of Ford's premier division-Aston Martin, Jaguar, Volvo, Lincoln and now Range Rover. What a line-up. Yet again game, set and match to the canny Lebanese born Australian boss of Ford.

What of poor Rover? Well, a virtually unknown British venture capital outfit by the name of Alchemy Partners have agreed to take it off BMW's hands. The details are somewhat murky but one thing is certain. A lot of jobs will be lost. Production will be cut back from over 200 thousand cars to 100 thousand cars per annum. The company will trade under the name of MG Car Company and will orientate towards the sporty end of the market, a sensible move under the circumstances.

Alchemy's boss is 49 year old Jon Moulton who said earlier today on the BBC that thousands will lose their jobs whilst others will have better paid secure jobs in the future. The automotive brain within Alchemy is none other than Kevin Morley, known to his friends as Superkev. Larger than life in every way-6ft 3 tall, 225 pounds with an extremely extrovert nature, Kevin is someone you can love or hate but will never forget meeting! At one point he was Rover's marketing director and ran an advertising agency as well. His client? Rover. Figure that one out!

Anyway, apparently Alchemy has lots of money from institutional investors including house-hold names such as Goldman Sachs and Bank of America. They are also trying to get paid (!!!) by BMW for taking their problem child off their hands. Naive they are not!

Not that BMW are leaving the white cliffs of Dover. Oh no. It is far more complicated than that. They are taking the newly designed Mini to Cowley -near Oxford- which they intend to launch under their own name. They will also continue to supply Alchemy with the new and not particularly successful Rover 75 for the time being. Won't be for long if you ask me. A classic case of too little too late. An OK car in the days of great cars.

BMW are also keeping their engine plant in Britain which is nearing completion. All rather complicated and a big mess which will take a while to sort itself out.

My guess- Alchemy will do a deal with VW . Mercedes have the SLK, BMW the Z3, Porsche the Boxster. VW-zero, zilch when it comes to this market segment. Put an attractive body on the Golf chassis and with VW's outstanding engines and gearboxes you have an instant rival. Well, not exactly instant but you get my drift. Alchemy gets lots of D marks and VW get a facility which rival BMW have spent a fortune on updating.

In the meantime Prime Minister Tony Blair is making all sorts of predictable noises about being outraged and all that but then he would, wouldn't he?! The elections are not that far away and all those workers are voters. Not to mention the suppliers and the dealers.

To those, like me, who have witnessed the demise of Rover it was always a question of time. Jaguar was in a similar quandary until Ford bought them, shook them up, read several riot acts to workers and management alike and now there is a waiting list for their cars all over the World. In the North East of England in Sunderland there is a Nissan car factory which is the Japanese company's No. 1 in terms of efficiency and quality world wide! So it isn't a British disease really, it is something that for some reason haunted Longbridge for a long time. The plant was built in 1906 and unfortunately the attitudes date back to the beginning of the 20th Century as well.

As for BMW? Well, their shares went up over 10% in a day on the news. As for the future? Only time will tell. They make some of the finest cars in the World so I would not cry for them just yet. Especially as the "English Patient" is now in someone else's hospital...