Rover Group Moves To Counter Overvalued Pound

ROVER GROUP PRESS RELEASE
Rover Group Moves To Counter Overvalued Pound

The Rover Group, Britain's largest car manufacturer and exporter of consumer goods, today announced a series of measures to offset the impact of the overvalued pound.  They include production cuts and a manpower reduction programme involving at lease 1,500 jobs.

Some product lines at Rover Group's Birmingham, Solihull and Oxford factories will begin a four day week from mid-August.  Further job losses will be avoided if an expansion of flexibility arrangements, including a carry over of working time from 1998 to 1999, is successfully implemented.

Dr Walter Hasselkus, Rover Group chairman and chief executive, and BMW board member said: "We have been protected from the effects of the strong pound by forward buying of currency, but this protection cannot last forever.  The time has come when we must take action.  These measures will protect the business for the short term without threatening long term investment, our lifeblood for the future, and will maintain progress towards our strategic objective of profitability by the end of the decade.

"Although our productivity has improved significantly in the last few years it cannot compensate for the distortion in trading conditions caused by the 30 per cent decrease in sterling competitiveness since 1996.  At a time when Rover Group's exports are increasing, the negative effect of currency on our business is considerable," he said.

The company also announced a medium term strategy to source more of its bought-in components from outside the UK, taking business worth more than a billion pounds away from UK-based suppliers.  New component sourcing arrangements will begin with Rover's new luxury car - the R40 - which will have an overseas content of between 25 and 30 per cent, compared with the current Rover Group average of 15 per cent.

The job reductions, which will affect all operations except research, design and engineering, will be achieved through voluntary redundancies, early retirement, natural wastage, the ending of short term contracts, and filling many future manpower requirements from within the company.  All attempts will be made to avoid compulsory redundancies.  It is envisaged that the shorter working week will be compensated for by carrying over the hours not worked, to support production for future planned growth next year.

Dr Hasselkus added: "The service and financial sectors of the UK economy give a false impression of what is happening in the real world of manufacturing and international competitivess.  The current value of the pound means our revenue from vehicles sold abroad is reduced, while cheap imports are sucked into our home market."

Parent company BMW Group today announced that Rover Group worldwide sales for the first six months were 10,000 units ahead of the same period last year.  Sales in European markets, in particular, have demonstrated strong increases.   However, the benefit from these sales increases is being eroded by the overvalued pound.