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Tuesday, May 18, 1999 Published at 06:35 GMT 07:35 UK


Business: The Company File

Rover losses 'escalate'

Rover's great hope, the R75

BMW wants to double the output at its UK subsidiary to one million cars in the long-term, according to Rover's chairman, Werner Sämann.

He announced the plan in an interview with German car magazine Auto, Motor und Sport.

But losses appear to soar at Rover.

The German magazine Stern is quoting BMW insiders as saying that Rover losses will as high as 2.3bn Deutschmarks (£775m), up from DM 1.8bn last year and defying management promises of lower losses for 1999.

According to German newspaper Die Welt, losses could be even higher, up to DM 2.6bn. BMW has denied the reports.

Later this Tuesday, the Munich based company will hold its annual earnings press conference.

Price cuts

Mr Sämann wants to achieve his ambitious sales target through a combination of higher productivity at Rover's plants, lower prices and improved quality.


[ image: Werner Sämann (left) celebrates the Rover 75]
Werner Sämann (left) celebrates the Rover 75
The price for Rover's 200 and 400 models will be slashed by 10%, so that the models can compete with cheaper products from France, Italy and Germany, he said.

Mr Sämann told Auto, Motor und Sport magazine that the strong pound had enabled Rover's rivals to compete on price.

However, a spokesman for Rover UK, Nick Argent, told BBC News Online that there were currently no plans to cut prices in the UK market. He suggested that lower prices might be used to boost sales of Rover cars in other European markets.

Rover recently held a "spring sale", but prices are now back to old levels.

Stock clearance

Despite the ambitious targets, Rover's production figures have actually been falling during recent months. In 1998, Rover produced just under 500,000 vehicles, a drop of 4.8% on the year before.

For 1999, the company plans to produce even fewer cars, about 450,000. Mr Sämann hopes that this will clear the current stock of cars.

The decline is an indication of the company's problems.

Productivity at Rover's plants remains low, despite a multi-billion pound investment by BMW.

But Mr Sämann is optimistic that he will be able to improve quality standards at plants like Longbridge, the factory with one of the lowest levels of productivity in Europe.

"After all, we managed to turn BMW's plant in Munich into an ultramodern factory as well," Mr Sämann is quoted as saying.

The company is now setting its hopes on its new model, the Rover 75. Mr Sämann said the new car would take a "lead" in shaping the Rover brand.

"The car will have the same quality as a BMW", he promised. "We are likely to offer a three-year guarantee on the car around the world."

But there are still problems. Stern magazine reports that the delivery of the Rover 75 is once again being delayed, because its quality is not up to BMW standards.

Rover sports car

Mr Sämann wants to use new Rover platforms to create new sports cars - similar to the MG- and possibly revive other classic brands owned by Rover.

The financial problems at Rover triggered a crisis at parent company BMW, with the company's chairman and his deputy leaving earlier this year.

The new management under Joachim Milberg sacked the team in charge of Rover and decided to get much more involved in the UK company's day-to-day running.

BMW briefly threatened to move some of the Rover production from the UK to Hungary, which could have cost some 50,000 jobs at the Longbridge factory and suppliers in the region.

The UK government secured Longbridge's future only after offering a multi-million pound grant, designed to boost productivity at the factory.



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