Rover's new car and old job fears

BMW has warned that further job cuts may be in the offing at its Rover subsidiary in the UK.

The comments take some of the gloss off the launch of Rover's new R75 executive saloon at the Birmingham International Motor Show, coming on the same day. Rover says its new car displays "pure sex appeal" and could lead a brand revival leading industry observers to dub the car Rover's "last-chance saloon".

Meanwhile, BMW chief Bernd Pischetsrieder said tough talking over the subsidiary's future continues with more job cuts, new flexible work practices and other ways to cut employment costs all being considered. Workers have been fearing an overhaul of working conditions and further cuts of up to 2,000 jobs.

Earlier this year, Rover announced it was cutting its workforce in the UK by 1,500 and there are now fears that any future cuts could fall on its Longbridge plant, where 12,000 people are employed.

On sale March

The R75 will go on sale in March 1999 and cost UK buyers around £19,000. Germany's BMW, owner of the Rover group, aims to produce 100,000 cars during the first 12 months. The R75 is the first car to be wholly developed under BMW's ownership, at a cost of £700m ($1.19bn).

The company wants to pitch the R75 against cars like the Audi A4, the Mercedes C-class and the Alfa Romeo 156. Rover hopes that its new saloon will help it to make a profit again. BMW bought the UK manufacturer in 1994, and has since invested more than £2.5bn in the company.

Job worries

Two-thirds of the 2m cars bought in the UK are now imported, and the future of Rover as a mass car producer in particular rides on its new products. Union negotiator Tony Woodley of the Transport and General Workers Union flew to Munich last week for crisis talks with BMW chairman Bernd Pischetsrieder.

The high pound has hit profits at Rover and the company has threatened to move £1bn of its £4bn components expenditure overseas. But the Land Rover division remains highly profitable, with the successful launch of the Freelander, the smaller Land Rover, last year.

Some analysts believe BMW might be considering shrinking the Rover Group down to its most successful part, keeping only the Mini and MG divisions as well as Land Rover.

Testing times

The Asian crisis has cut demand for luxury models overseas and the expected sharp slowdown in UK growth has led most analysts to scale back their forecasts for the UK market, which is just recovering from the last recession.

Cheaper imports from Europe are likely to mean that car prices will fall next year. The government has been under pressure to allow more grey market imports after surveys showed that the same car can cost up to 30% less in continental Europe than in the UK.