BMW's plan for Rover

THE INDEPENDENT
BMW plan secures future for Rover: Speculation over car maker's prospects is ended by expansion programme that will create 1,450 jobs
By MARY FAGAN, Industrial Correspondent

PLANS by Rover to create 1,450 jobs end months of speculation over the group's prospects since it was bought by BMW of Germany for pounds 800m this year. BMW's purchase of Rover from British Aerospace provoked a political storm and caused concern among unions that the future of the company and its thousands of employees could be under threat.

The expansion is part of a pounds 1.5bn investment programme over the next five years which underlines BMW's commitment to Rover product lines, including the new generation of Range Rovers, launched last month.

Professor Garel Rhys, head of the economics unit at Cardiff Business School, said: 'The investment plan formalises what BMW has been flagging over the past two to three months. It shows Rover has a secure future under the new ownership, but this level of investment would probably have happened even if Rover had stayed within the orbit of British Aerospace.'

BMW's chairman, Bernd Peschetsrieder, always said he wanted Rover to develop independently, indicating that the company would see significant investment in research and development and a new model programme.

One of the flagship launches of the next investment programme will be a smaller Range Rover, designed to rival Suzuki's Vitara and the new Toyota RAV4. Tipped for launch in 1997, the new sports- utility vehicle will be aimed at younger customers, who may trade up to the hugely successful Discovery and larger Range Rover later.

Much of the investment will be used to adapt Land Rover's operation to high-volume output of smaller vehicles, but the company will not give spending details. The new Range Rover cost pounds 300m to develop and was part of a five-year pounds 1.2bn investment programme.

Next year Rover launches a successor to its biggest-selling 200 and 400 models. The company has not ruled out further collaboration with its former shareholder Honda, despite disagreements over the sale to BMW. The British and Japanese companies are thought to be working on replacements for the Rover 600 and Honda Accord.

Rover also plans to replace its 800 sedan, which will probably be the first car to show significant input from BMW. The companies are working on niche products such as the small MG sports car. Other cash will be spent overseas. About pounds 30m is going on a deal with South Korea's Kia car company to develop a range of new engines, which should give Rover greater independence from Honda.

The company also plans to start building the ageing Maestro small family car in Bulgaria, and investments are planned in assembly and sales facilities in South Africa, Brazil and India.

John Towers, Rover Group chief executive, said:  "These new jobs are the result of Rover's continuing success in raising sales of Rover cars and Land Rover vehicles throughout the world, over the past 18 months. Next year will see further production developments and an expansion of our business into new and developing markets, underpinned by record levels of investment in both people and manufacturing facilities in the UK,"

Rover's announcement at the British International Motor Show in Birmingham bucks the trend towards increasing caution among car manufacturers in Britain over the level of recovery.

There is a growing consensus that car sales this year will not reach the hoped-for two million after a poor August and an increase last month of only 6.5 per cent. New car sales rose 14 per cent in the first half but the sudden slowdown has sparked fears that the final quarter may be almost flat.

Charlie Golden, chairman of Vauxhall, said total new car sales this year might only reach 1.92 million. Although lower than previously forecast, this would be an increase of 8 per cent on 1993.