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Friday, February 12, 1999 Published at 09:49 GMT

Business: The Company File

Cash handout for Rover?

Subsidy may help transport Rover into the 21st Century

The UK Government and BMW are reported to be negotiating a rescue package involving official subsidies for Rover, the German carmaker's subsidiary.

A deal could see the Department of Trade and Industry (DTI) give £200m in assistance in return for BMW injecting £1bn of its own, according to the Times newspaper.

Longbridge life-line

BBC News' Patrick Bartlett reports on the plans for Rover
The money is earmarked for the overhaul of the Longbridge plant in the West Midlands, at the centre of profitability worries that threaten Rover's future.

Longbridge and its 14,000 workers have faced an uncertain future since Rover's troubles led to blood-letting in the BMW boardroom last week. Pro-Longbridge chairman Bernd Pischetsrieder and the board member who wanted to see it closed, Wolfgang Reitzle, were both removed in favour of Joachim Milberg.

[ image: Production overhaul needed]
Production overhaul needed
The plant needs a massive upgrade to bring it into line with 1990s best-practice in car manufacture which would also mean the workforce being retrained.

The Times reports any assistance agreement would depend on BMW's commitment to the overhaul. Under EU law, government subsidies can be paid to develop new industry but not to keep an inefficient plant open.

Prime Minister Tony Blair has already said his government will not bail out failing businesses but hinted that assistance for Rover was possible. The Trade Secretary Stephen Byers, meanwhile, promised earlier this week to lobby BMW hard to save the Longbridge workforce.

Rover has been a loss-making enterprise for BMW since it bought the company in 1994. The company's Longbridge plant has already seen a massive restructuring and job losses .

New Longbridge models

On Thursday, a German newspaper report suggested that the new BMW chairman, Joachim Milberg, had plans for a new range of small cars, possibly to be built at Longbridge.

Süddeutsche Zeitung reported deputy chairman Manfred Schoch as saying UK Government assistance would be critical in the company's decision over where to build.

He is also reported to have said that Rover's components purchasing would be overhauled with more parts being bought from low-cost European manufacturers.

Such a move could be a blow to some of the tens of thousands of UK workers employed at Rover suppliers in the West Midlands.

Spring sale

Meanwhile, Rover has announced price cuts of up to 16% on some models.

The company said a third of its existing Rover 200 and 400 ranges would see discounts averaging 9.5% during March. The sale coincides with the release of the 'T' series registration plates in the UK.

A Rover spokesman has denied the Spring sale has been prompted by poor sales figures in recent months and ongoing losses on the balance sheet.

The company announced December sales numbers last week showing a 45% slump on the same month in 1997. Its share of the UK market slipped to just 4%.

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