Rover cuts losses to £26m

THE GUARDIAN
By Lisa Martineau in Tokyo and Andrew Cornelius

Rover, the state-owned vehicles group which the Government is negotiating to sell to British Aerospace, announced yesterday its best trading figures for nine years. But the group still recorded net losses of £26.8 million in 1987 after taking account of interest charges and taxation. This compares with losses of £892 million the previous year.

The strike-ridden Land Rover business increased its operating profits from £1.6 million to, £22.8 million compared with 1986, while the Austin Rover volume car business, turned 1986 losses of £168 million into profits of £5.1 million. Group turnover was £3.09 billion, against £3.4 billion the previous year, reflecting the disposal of businesses with more than £1 billion of turnover during the year.

"You have to look at the numbers as a comparison, " Mr Graham Day, Rover Group's chairman, said, "and as a comparison of what went before, they're bloody good,"

The results reflected a 14 per cent increase in production to 509,000 vehicles against 1988, improved margins on sales and continuing efforts to out costs, particularly in administration where 1,200 jobs were axed during the year. Exports also soared by 69 per cent to £1 billion, helped by the launch of the Rover Sterling and the Range Rover in the United States.

"One car in three is now exported, compared to one in four in 1986," Mr Day said shortly after arriving in Tokyo for a meeting with Lord Young, the Trade and Industry Secretary, Professor Roland Smith, chairman of British Aerospace, and Tadashi Kume, the chairman of Honda, on the proposed merger of Rover and BAe. He stressed that he didn't expect the meeting to get down to specifics "at this stage" on the role of Honda, which is collaborating with Rover to develop new cars, within the proposed newly merged group. He said he "had a great deal of confidence" that the BAe-Rover deal would go through.

Mr Day said there was aircraft-car making synergy between the two groups "and everybody is looking at new materials to bring down the weight of vehicles", But, he added that "the synergy in process rather than products is perhaps more important".

Honda said it was pleased with the proposed merger, but wouldn't be drawn on any new joint ventures it thought could come out of the deal. Honda and Rover's joint ventures account for "just under 10 per cent of what we are doing," Mr Day said. On the potential problem of a foreign firm in joint ventures with a group with defence interests, Mr Day said this was "a question of horses for courses" and "each specific collaboration would have to be okayed".

The cost of serving Rover's debts halved from £100 million in interest charges in 1986 to £49.5 million last year, reflecting the benefits from the £680 million government debt write offs when the Leyland Trucks business was sold to DAF, in Holland. Rover's share of profits from the minority share stakes it holds in businesses such as Leyland/DAF and Unipart, which have been sold in the past two years, amounted to £11.1 million.