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Friday, February 5, 1999 Published at 19:25 GMT

Business: The Company File

Rover on a knife's edge

Rover's future in the balance

The chairman of BMW has been removed in a boardroom battle at the luxury car maker.

The BBC's Stephen Evans: "BMW is deeply divided on what to do"
Speculation was rife that Bernd Pischetsrieder would be clearing his desk after the directors of BMW were split over what to do with the loss-making Longbridge Rover plant in the UK.

Longbridge has become something of a liability for BMW returning major losses since it was bought by the German company five years ago. Mr Pischetsrieder's successor is Joachim Milberg.

[ image: Trade and Industry Secretary Stephen Byers]
Trade and Industry Secretary Stephen Byers
The hope in the West Midlands is this BMW appointment will mean a reprieve for loss-making Longbridge, but Professor Milberg's intentions are not known.

The UK Trade and Industry Secretary Stephen Byers said he planned to speak to the new boss on Saturday to stress the importance the government attaches to Rover in general and Longbridge in particular.

The BBC's Stephen Evans: "The mood is despair"
"The government has a very constructive working relationship with BMW and I am sure that this will continue," said Mr Byers.

A future for Longbridge?

Professor Milberg's first task will be to consult closely with the recently-appointed Rover chairman, Professor Walter Samann, on how to handle the Longbridge problem.

[ image: Rover workers end their shift as their BMW bosses meet in Munich]
Rover workers end their shift as their BMW bosses meet in Munich
Another departure from the BMW board is that of Dr Wolfgang Reitzle, who had been widely expected to take over from Mr Pischetsrieder. Mr Reirzle was on record as saying Longbridge had no future.

Surprise move

The BMW board, meeting for nine hours in Munich, surprised the industry by appointing Professor Milberg as chairman.

Aged 55, he is a well respected engineer. Trades unions have welcomed him as "safe pair of hands".

Rover negotiator for the Transport and General Workers Union, Tony Woodley, said: "We are disappointed and concerned at the removal of Mr Pischetsrieder.

"But while people are important, it is the on-going policy that must continue.

"That policy for major investment and new models in Longbridge and the other
[ image: The BMW headquarters in Munich]
The BMW headquarters in Munich
British plants has already been agreed, and not without considerable sacrifices by the workforce, including job losses.

"Any thoughts of closing plants or sacking our people while holding on to Rover's profitable jewel in the crown (the four-by-four vehicles) will result in outright opposition," added Mr Woodley.

Longbridge makes both the Rover 200 and 400 models, the MGF sports car and the perennial Mini, which is now in its 40th year.

Facelifts for the 200 and 400 are due next year and Prof Milberg will have to make a decision on a medium-sized car to replace these models in three to four years time.

Longbridge is also due to turn out a new Millennium Mini for the year 2000.

UK Government intervenes

The UK Government had already stepped up its attempts to persuade BMW to keep Longbridge open.

Trade Secretary Mr Byers said it was prepared to offer financial assistance to BMW.

The UK Deputy Prime Minister John Prescott joined in calling for BMW to honour its agreement with trade unions to safeguard the future of Rover in the UK.

Last year Rover trade unions and BMW agreed a rescue package involving a £2bn ($3.3bn) cash injection, 2,500 redundancies, and new flexible working hours to try to return the company to making money.

The rescue package struck with the unions led to the resignation of Rover's boss Walter Hasselkus, who accepted full responsibility for Rover's difficulties.

The problems at loss-making Rover have drained BMW's 1998 profits.

Turmoil in the car industry

[ image: Walter Hasselkus: Accepted responsibility for Rover's problems]
Walter Hasselkus: Accepted responsibility for Rover's problems
Mounting losses at the UK car group put Mr Pischetsrieder's future in doubt. Latest figures show that Rover's UK sales almost halved last month compared with January last year.

Mr Pischetsrieder played a key role when he supported Longbridge as others in BMW were pushing for its closure, and he helped draw up the new workplace agreement with unions late last year which helped keep the plant open.

A large number of jobs rely on the fate of Rover. The Longbridge plant itself employs 14,000 workers and an estimated 50,000 people are employed in the West Midlands by companies supplying parts for car production.

The vital board meeting may also clear the way for a takeover of BMW by another car maker.

Both Volkswagen and General Motors, the world's biggest automobile manufacturer, have already expressed their interest.

A merger would create fresh doubts about the long term future for Rover's major UK plants.

The car industry is currently in a state of turmoil, after a series of major mergers.

After Ford's takeover of Volvo, the world's carmakers are showing intense interest in the remaining independent premium car brands.

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