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Longbridge hopes dashed as BMW rejects UK aid offer

20 March 1999

Philip Thornton Transport Correspondent

HOPES OF saving Rover's car factory at Longbridge were dealt a severe blow last night after its German owner BMW rejected a British aid package. BMW said it did not agree with UK officials on details of the subsidy offer to help build a new medium-sized car at Rover's West Midlands plant.

"The offer is on the table, but the Government's and BMW's ideas are not congruent. We're negotiating further," a BMW spokesman said. BMW executives were said to be shocked that the Government had offered less than £120m. The Department of Trade and Industry had been expected to offer around £180m in return for more than £1.7bn of investment by BMW to build a new medium-size car at Longbridge. "They did not think they were in a poker game and that is what caused the surprise," said one source.

Stephen Byers, Trade and Industry Secretary, said he was still that optimistic a deal could be struck. Speaking during a visit to the LDV specialist car firm in Birmingham, he said: "The Government has made a formal offer to BMW to provide assistance to secure a modern and productive plant at Longbridge.

"We are confident that we will be able to arrive at a successful conclusion to the negotiations." Bill Morris, general secretary of the Transport and General Workers' Union, called for a swift resolution of the talks. He said the jobs of the 12,000 Longbridge employees as well as those of other workers in the regions depended on saving the plant.

"The urgency of the situation demands quick and constructive decisions, not brinkmanship," he said. "It's not a game of poker. There are too many jobs on the line." Roger Lyons, general secretary of the Manufacturing, Science and Finance union, said: "We are disappointed with the delay."

Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said: "It is essential that while discussions are ongoing, we remain calm and confident." BMW is now believed to be looking more seriously at siting the plant in Hungary, where it has identified a green-field site near a successful Audi factory.

The company established the viability of locating in Hungary in order to meet European Union rules on grant aid. Governments can only subsidise investments where it can be proved that the company could have saved money by going outside the EU. Sources within BMW said it was impossible to discount the possibility of looking at eastern Europe more seriously "if things went horribly wrong".

BMW has vowed to turn Rover around by 2000 after financial figures published on Thursday showed that the British outfit had plunged £650m into the red last year compared with a loss of £91m in 1997. Meanwhile, Ford Motor Company has hired Wolfgang Reitzle, the charismatic former BMW product development chief, as head of a newly created luxury car division, Premier Automotive Group.

Mr Reitzle will become chairman of Jaguar Cars and Volvo Cars. As head of the Premier Automotive Group, he will also be responsible for Aston Martin and Lincoln vehicles.

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