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Tuesday, July 28, 1998 Published at 12:13 GMT 13:13 UK

Business: The Company File

BMW on a Roller

Rolls-Royce's new model is powered by BMW engines

BMW, the German car giant, has signed a deal to use the Rolls-Royce name just weeks after losing out in a bitter takeover battle for the luxury car marque.

BMW will make Rolls-Royce cars from 2003 after calling a truce in its battle with arch rival Volkswagen, who bought the luxury car maker for £479m earlier this month.

As part of the shock agreement BMW will continue to supply the Crewe-based Rolls-Royce Motor Cars with engines until the end of 2002.

After that date, VW will call its luxury cars Bentleys, and BMW will be free to develop its own luxury car using the Rolls-Royce name.

"BMW will take over the distribution of Rolls-Royce cars and will continue production of the Silver Seraph in cooperation with the plant in Crewe and manufacture additional Rolls Royce automobiles in a newly-built plant in Great Britain," BMW chairman Bernard Pischetsrieder told a press conference.

Steve Taylor, union convenor, on workers' worries at RR
Union convenor Steve Taylor said that the 2,500 strong workforce was frustrated by the continued uncertainty over plans for the company,and felt treated like pawns.

Industry analysts suggested that VW had got the worst of the deal. "They will have to put a lot of expense to nurture the Bentley brand and win people away from the Rolls-Royce name," commented Jonathon Sotrey of European Auto Research.

Back in the driving seat

It was BMW's close manufacturing links with the luxury car maker that encouraged the German company to believe it would be successful in its bid to buy Rolls-Royce earlier this year. But it was pipped by rival Volkswagen, whose higher bid was accepted instead.

BMW, who has been making engines for the new Rolls-Royce Silver Seraph which was launched earlier this year, then carried out its threat to cut off supply.

But there was a long-standing question over the ownership of the brand name. While the car maker itself was owned by engineering firm Vickers, the brand had been retained by the aero-engine maker Rolls-Royce plc when the two companies were separated in the l970s.

Brand building

Under the terms of the deal, BMW will buy the rights to the famous brand from Rolls-Royce plc for £40m and then license them "exclusively and free of charge" to Rolls-Royce Motor Cars for the next four years.

But there is evidence that the bitter battle has already hit sales. Rolls-Royce said that its sales in the 6 weeks since the VW deal was confirmed fell by 30%.

BMW has already built up a significant manufacturing capacity in the UK by the acquisition of Rover Cars.

VW has also been acquiring other well-known brands. Lamborghini, the Italian luxury car maker, fell to them earlier this month.

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