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Siemens engine link with Rover

12 January 1996

RUSSELL HOTTEN

Siemens, the German industrial giant, is to work closely with Rover Group on a new engine project in a move that appears to confirm that the car company will build a new pounds 300m plant in the UK. Jurgen Gehrels, Siemens' chief executive, said yesterday that his company was close to investing in a UK component facility to supply a new-generation K-series engine being built by Rover.

The car company, owned by Germany's BMW, maintained yesterday that no decision on whether to build the engine plant had been made. It was thought that Rover had also been looking at potential sites in Germany and Austria, but is now almost certain to build the plant in Birmingham. Rover is hoping to negotiate a government grant package.

Siemens would supply electronic control units and other components for the new engine. The company already supplies fuel systems to Rover, and has worked for BMW for many years. Mr Gehrels said: "Rover have interesting plans and we want to be part of them. We will decide this year where to build our plant. Rover have already said that they want to work with us."

The petrol engine would be used in a new generation of Rover and BMW cars being developed for launch in the next century. One option being considered is for Rover to shift its diesel engine production to BMW in Germany to create more capacity in Birmingham for the K-series.

The engines will power the successors to Rover's 600 and 800 models, as well as Land Rover's four-wheel-drive vehicles and BMW's 5-series. Siemens also said yesterday that it expected to make acquisitions in the British telecommunications sector to boost its market position in the UK.

Mr Gehrels said: "The market for information systems in the UK is worth more than pounds 10bn a year. Clearly our position is rather weak and therefore I think further acquisitions will be necessary to strengthen our position significantly." Siemens expected the UK market to continue growing at a rate of around 6 per cent in 1996. "As in previous years we mean to grow faster than this," Mr Gehrels said.

Last autumn Siemens bought a 75 per cent stake in Mercury Communications' private voice communications unit. It also expanded its participation in the rail maintenance market.

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