|You are in: Business|
Tuesday, 2 May, 2000, 08:35 GMT 09:35 UK
The Rover breakdown
The Rover car company is synonymous with the UK's industrial progress throughout the 20th century.
Like UK manufacturing overall, it has seen prosperous times, its cars loved for many years by British motorists, and it has struggled for survival. Its toughest battle has come in recent years as the overwhelming tide of supercompetiviness has seen many an icon fall from grace.
Rover has been making cars since 1904 and contributed its share of technological advances - the Rover gas turbine car in 1950 and the four-wheel drive T3 in 1956 with its fibreglass bodywork.
The P4, P5 and P6 series became hallmarks of British motoring throughout the 1960s and 70s, with the P4 affectionately known as 'Auntie' Rover.
During the prosperous post-war years, Britons bought as many Rovers as the company could turn out, but its industrial problems in the 1970s signalled the start of its problems, and those of other big manufacturers.
Make or break
The latest make-or-break chapter in Rover's history began in 1994 when Germany's BMW bought the UK manufacturer, trying to transform it into a competitive carmaker for the 21st century.
BMW was mainly interested in the group's Landrover division of four-wheel drive vehicles.
However, the rest of Rover appeared to be a good fit as well, with its range of small to medium-sized cars complementing BMW's luxury cars.
BMW began to pump hundreds of millions of pounds into Rover, but after a few years losses at the subsidiary proved to be a drag on profits.
Earnings at BMW group were hit, and company executives began to grumble for how much longer the firm could justify such losses to share holders.
In February 1999, BMW's board ousted company chairman Bernd Pischetsrieder, the man behind the Rover acquisition.
He was succeeded by Joachim Milberg, who imposed a two-year deadline for Rover to get its act together or else.
Productivity is the key to Rover's survival. The figures for the Longbridge plant look bad. A 1998 survey showed the plant produced just 33 cars per worker annually. In comparison, the Nissan factory in Sunderland, which is at the top of the productivity league, churns out 98 cars per worker each year.
Until the latest workplace deals and despite previous overhauls, outdated work practices led to excessive labour costs, while equipment was from another age. At its most basic, the problem was high overtime payments and old machinery.
Rover's landmark "New Deal" with unions in 1992 was supposed to have solved that. It saw the introduction of flexible work practices, retraining, and the promise of jobs for life. Little more than six years later, following massive job losses and the latest workplace overhaul, the New Deal is looking old hat.
BMW says those "new flexible" arrangements have made the company unproductive in the late 1990s. That is how much things have changed.
Desperately trying to cut costs, Rover went through several rounds of restructuring, shedding thousands of workers in the process. and new flexible working arrangements. Workers agreed to unpaid overtime in return for extra time off when production was slack.
However, the Quandt family, who own most of BMW, set high standards and were anxious to see Rover begin pulling its weight.
Driven a long way
While Rover has struggled, and by some measures successfully so, to leave behind the infrastructure of previous decades along with working arrangements hard-won by the workers in more militant times, new kids on the block like Nissan have been able to start up on greenfields sites, incorporating the latest technology without the industrial baggage of the past.
BMW had hoped that a string of new models - the Rover 75, and updated versions of its 200 and 400 series, would be enough to turn around the company.
Despite winning the accolades of the motoring press and a number of design awards, drivers have been reluctant to buy the cars.
In the UK, for example, the Rover 75 is awkwardly priced - half-way between the luxury market and more basic cars, putting it in a bracket with precious few customers.
Another problem has been the collapse of the export market because of the strength of the pound. Selling Rovers in continental Europe has not been a very attractive proposition lately. Profit margins were squeezed, as the firm tried to keep prices down.
At the same time, Rover had trouble cutting costs through cheap imports, as many of its car components are sourced in the UK.
By March 2000, BMW had enough. With Rover piling up £2m losses a day, the firm decided to break up the company.
Rover Cars, i.e. the Longbridge plant, and the MG brand were to be sold to UK investors. The deal could include the successful MG brand, but this is a niche product.
The Landrover business - the only division making healthy profits - was offered to US car giant Ford.
BMW, meanwhile, plans to keep Rover's modern Cowley for itself, where it wants to build the new Mini.
Whoever takes on Rover will need to persuade a sceptic public that the company's cars are worth buying.
To turn around Rover, the investors need success in the mass market, unless they opt for a 'Rover light' solution.
15 Mar 00 | Business
15 Mar 00 | Business
15 Mar 00 | Business
The BBC is not responsible for the content of external internet sites
Top Business stories now:
Links to more Business stories are at the foot of the page.
|E-mail this story to a friend|
Links to more Business stories
To BBC Sport>> | To BBC Weather>> | To BBC World Service>>
© MMIII | News Sources | Privacy