BMW hints at Rover expansion

THE INDEPENDENT
Russell Hotten

BMW, the German motor group, hinted at the further expansion of Rover Group yesterday, saying the UK company was a key part of its strategy to counter the effects of the strong mark. The company, like its German rival Daimler-Benz last month, warned of the worsening impact of exchange rates and the need to further internationalise its operations.

BMW reported increased interim post-tax profits up 5.2 per cent to DM305m (£98m). Sales, excluding Rover, rose 11.6 per cent to DM17.66bn. With the inclusion of Rover, sales were DM23.32bn.

The company said that "movements in exchange rates will have a big effect on results for 1995", which caused a rush of profit downgrades by German analysts.

BMW said it wanted to take eevery measure to reduce in a lasting way the medium-range effect of changes in exchange rates. A new factory is being built in the US, and the development of the Rover offered many promising ways to soften the exchange rate impact.

BMW is already committed to a massive investment programme in new Rover models, and is likely to build new "niche" cars and a vehicle suitable for launch in the US in the next century. However, in the short term Rover is likely to become more closely involved in BMW's efforts to develop the international spread of the group's buying, assembly and distribution operations.

Rover's profits were not disclosed, though analysts said the company, which launched its new 400 series in the first half, probably contributed little. BMW said that while its car sales would grow, a model change-over with the launch of a new mid-range 5-series car later this year meant the rate of growth would be less than in the first six months.

"Our result for the full year will not just depend on volume growth but also considerably on the development of exchange rates," the report said.