Rover cuts loss amid BMW fears of strong pound

THE INDEPENDENT
Michael Harrison

The Rover car group cut losses last year from pounds 158m to pounds 119m but its German parent BMW warned that its performance this year could take a sharp turn for the worse if the pound remained at current levels.

BMW, which invested DM1.2bn (pounds 445.5m) in Rover in 1996, said that under German accounting rules its losses last year had fallen from DM335m to DM279m. German accounting rules allow companies to write off investment in the year it is incurred.

The bigger fall in losses reported by Rover reflects the strengthening of the pound against the mark. However, under British accounting conventions Rover would have made an operating profit before interest last year of pounds 90m to pounds 100m after a profit of pounds 85m the previous year.

Volker Doppelfeld, BMW's finance director, said it expected to invest pounds 600m in Rover this year as part of a four-year pounds 4bn programme that will see the launch of a new small Land Rover, a new Mini and a replacement for the Rover 600 and 800 series.

Mr Doppelfeld said BMW's investment plans remained the same and he expected Rover's performance to improve this year. But he added: "If sterling continues to run havoc then this could have a negative effect."

Last year Rover sold more cars abroad than at home for the first time in its history. Exports reached 277,000 out of total sales of 507,245 vehicles worth pounds 6.5bn. Sales to mainland Europe rose by 16.5 per cent with Italy the largest single export market. Rover's first-quarter sales rose 21 per cent to DM3.6bn

BMW also dismissed as "utter rubbish" reports that it wanted to sell the loss-making Rover car business to concentrate on the profitable Land Rover-Range Rover part of the group.

The new mini Land Rover, to be called the Freelander, will be launched in October and will compete with the likes of Toyota's Rav4. The 600- 800 replacement is due to appear towards the end of next year.

Excluding Rover, BMW said group sales rose 22 per cent to DM14bn in the first quarter, amid continued strong demand for its 5-Series, though it expects the pace of sales to slow during the year. "Growth rates are very high at the moment, but are expected to diminish, in percentage terms, in coming months," said chief executive Bernd Pischetsrieder.

Mr Pischetsrieder said sales of BMW's 3-series, which account for just under two-thirds of the group's car sales, rose 1 per cent in the first three months and are expected to grow at the same pace for the rest of the year before being phased out for a new model.