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Last Updated: Wednesday, 10 November, 2004, 15:56 GMT
Rolls-Royce plans convertible future
By Jorn Madslien
BBC News business reporter

Rolls-Royce 100EX
The convertible will be inspired by the 100EX concept car
Rolls-Royce Motor Cars - the luxury car maker owned by BMW - has confirmed it is to build a convertible version of its luxurious Phantom model.

The news had been expected after Rolls-Royce touted its 100EX convertible concept car at motorshows throughout the year to promote the marque's centenary.

But the plan to launch a new model appears risky.

Sales of the Phantom, the first Rolls-Royce built by BMW, have yet to take off and the company has seen the departure of two chief executives in just five months.

Shared architecture

Rolls hopes to reduce costs, and thus the risk, by sharing parts between the Phantom and the new convertible model.

In this way, the development costs for the new model should be brought down well below those incurred ahead of the Phantom launch.

Rolls-Royce Phantom on the road
Fewer than 900 Phantoms were sold during the car's first 20 months

The two-door, four-seat convertible, codenamed RR02, will share the Phantom's 6.75 litre V12 engine and it will be based on the same engineering principles, although its design will be closer to the 100EX concept car Rolls developed to celebrate its centenary this year.

"It will be slightly smaller... [but] the look of it will be heavily influenced by the 100EX," Graham Biggs, head of corporate communications, told BBC News.

Since Rolls-Royce cars are built by hand, the convertible will not require a new factory. Instead, it will be constructed by the existing 500-strong workforce at the Rolls-Royce manufacturing plant at Goodwood in Sussex.

Not about numbers

It is not yet known how much the RR02 will sell for, but it will probably be more expensive than the 250,000 Phantom.

Karl-Heinz Kalbfell
Mr Kalbfell left last month after just five months as chief executive

This is unlikely to hamper sales of the RR02, given that Rolls-Royce customers tend not to be particularly sensitive to price. But it is premature to talk about numbers, Mr Biggs said, as no sales targets have yet been set.

Indeed, no specific sales targets have been revealed for the two-year-old Phantom either. All the company is prepared to say is that it will sell an average of 1,000 cars per year during the model's 12-year life cycle.

So far, sales have fallen short of such targets. During its first year, just 300 cars were sold. This year, however, sales will "more than double that" and sales will continue to grow as the Phantom becomes better known in the market place, Mr Biggs said.

Mr Biggs declined to give a specific prediction about sales. "It's not really about the numbers," he insisted, stressing that Rolls-Royce Motor Cars is in the black in terms of operating profits.

Return on investment

That is not to say sales do not matter.

Rolls-Royce Motor Cars chief executive Tony Gott
Tony Gott stepped down as chief executive in May

Given that only 556 Phantoms were sold during the first 10 months of this year, it appears fairly certain the firm will not sell 1,000 of the cars in 2004.

According to some estimates, the cumulative revenue shortfall for 2004 could top 50m if sales come in at, for example, 750 cars this year.

But by the same estimates, that would still leave annual revenues at, or close to, the 150m mark and there is every chance that BMW, which originally invested 105m in the business, would be satisfied with this.

Of the initial investment, 40m was payment to the jet engine maker Roll-Royce plc for the rights to the Rolls-Royce Motor Cars name and the Spirit of Ecstasy mascot.

The remaining 65m was invested in the Goodwood factory. Fresh cash injections from the German parent should not be required.

But this is a thorny issue which BMW is reluctant to discuss - beyond Mr Biggs' insistence that "our business is in good shape".

On the day of the announcement that the convertible will be built, there was no word from the Rolls-Royce's acting chief executive Stefan Krause, BMW board member in charge of finance.

No fall-out

Mr Krause took charge of Rolls-Royce late last month when the former chief Karl-Heinz Kalbfell was poached by Italy's Fiat Group to spearhead a revival operation for its Alfa Romeo marque.

BMW Chairman Helmut Panke
Mr Panke insists there was "no fall-out" between him and Mr Gott
BMW chairman Helmut Panke is said to have lamented Mr Kalbfell's departure and even pleaded with him to stay.

Fewer efforts were made to keep Mr Kalbfell's predecessor Tony Gott, Rolls-Royce chief executive until May this year.

Yet, in a recent interview with the BBC News website, Mr Panke denied rumours that Mr Gott had departed under a cloud.

"There was no fall-out," he insisted. "We met afterwards and we talked, there's no tension in there."

But Mr Panke also acknowledged that he had been in favour of Mr Gott stepping down.

"We had different understandings about what direction we should be taking, whether it was the company's strategy or what Tony Gott should do," he said.

The search for a new chief executive is now on, though with the decisions already made about the company's two models, the Phantom and the RR02, the next to hold the top job will have little influence on the company's immediate future.

It seems clear that these days Rolls-Royce Motor Cars is firmly controlled from BMW's headquarters in Munich.

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