Rover's future: Longbridge vs Hungary

BBC
Business: The Company File
German carmaker BMW says production of new Rover models, the key to saving the Longbridge plant, could take place in either the UK or Hungary.

Jonathan Charles in Geneva:
Porche claims unfair competition and is writing to the European Commission. The company has put the heat on the UK Government over investment grants by saying it had applied to both it and the Hungarians for state aid.

A decision to build a new medium size Rover range to replace the discontinued 200 and 400 series in the UK is crucial to save its Longbridge plant in the Midlands from closure. Heavy new investment is needed to overhaul the factory and bring it up to latest production standards.

Hungary denies Rover contact
But Hungary said that it has not been contacted by Rover. "Officially the Ministry of Economic Affairs did not receive any official request regarding economic development or any kind of tax breaks (from Rover Group)," said a spokeswoman for the ministry, which is in charge of economic development.

"As far as I know they are not even present on the Hungarian market," she said. She added that none of the officials in the ministry who would be responsible for dealing with such a request had been contacted by Rover Group.

Rival German manufacturer, Porsche, says it will lodge a complaint with the European Commission, if BMW gets money from the British government. Dr Wendelin Wiedeking, chief executive of Porsche, says it would lead to unfair competition.

Byers confirms request

The Government has confirmed BMW's request for a handout, which is believed to be in the order of £200m. Stephen Byers tells Radio 4's Today program that any cash grants for Rover depend on new investment plans. British Trade and Industry Secretary Stephen Byers has confirmed BMW's approach but would not say how much had been requested.

However, Mr Byers told BBC Radio 4's Today programme that he would not agree to a government-funded bail-out just to keep Longbridge open but would consider contributing to any new investment plans by BMW at Rover.

Shadow Trade and Industry Secretary John Redwood said the Government had to create a more manufacturing-friendly environment in Britain. He said: "BMW is demanding a large subsidy for Rover because Labour has made it too dear to make things in Britain."

Geneva announcement
BMW's new chairman Joachim Millberg is set to unveil his strategy for future models on Tuesday, at the Geneva Motor Show. It is believed BMW also has plans for a new smaller car range designed to challenge the Volkswagen Golf.

However, Rover director Bernard Carey says a decision on where production of the medium size Rovers will take place won't be finalised for two or three months. This suggests BMW may be playing the UK and Hungarian Governments off against each other but Mr Carey has denied the decision will hinge on the subsidy question.

Workers under a cloud

Chief negotiator for the Transport and General Workers' Union, Tony Woodley, said a decision in favour of the UK and Longbridge would be "warmly welcomed" in the Midlands. "It would start to remove the despondency and uncertainty that for too long has hung over Britain's biggest car plant," he said.

"We have got to get the vehicle, because without it 50,000 jobs including the 12,000 direct Rover jobs at Longbridge of course won't exist. "The cost to close Longbridge to the Government in year one alone would be well over £350m. That has got to be taken into consideration when a company asks for grant aid which they are legally entitled to ask for," he said.

A question mark has been hanging over Longbridge, Britain's largest car plant, since BMW announced a review of the loss-making factory last year and then fired its Chief Executive Bernd Pischetsrieder because of Rover's problems. The Rover plant is a major employer with a staff of more than 12,000 and tens of thousands more dependant on the firm for employment.

BMW has been struggling to turn around its Rover unit since buying it in 1994 for £800m. Its closure would be a huge blow to British manufacturing and the economy of the West Midlands.