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The BBC's Stephen Evans
"If Longbridge doesn't survive neither do suppliers"
 real 28k

Stephen Byers, Trade & Industry Secretary
"It is a matter we want to resolve quickly"
 real 28k

Tony Woodley, T&G Union
"This is not good news at all"
 real 28k

Friday, 17 December, 1999, 07:43 GMT
EU investigates Rover deal

Rover workers' jobs may be at risk


The British government's rescue package for Rover's troubled Longbridge plant in Birmingham could be blocked by the European Commission.

The BBC has learned that it wants to investigate whether the deal breaches European Union competition law - which limits the amount of state aid companies can receive.

The investigation will mean that any money promised to Rover will be put on hold for up to 18 months.

Trade secretary Stephen Byers told the BBC that there was a "strong case" for government aid to Rover, and he would be pressing the EC for a "speedy resolution" of the investigation.

"Delay is not in the interests of Longbridge or BMW," he said.

Rover's plant, the largest car manufacturing facility in the West Midlands, has been under threat for two years. It employs 14,000 workers, with another 50,000 jobs in the region coming from its suppliers.

Rover's owners, BMW, have been reluctant to invest in modernising the plant unless they could get some help from the UK government.

In June an aid package was agreed, with the government pledging 152m in return for a commitment from BMW to invest 2.5bn.

The hope was that BMW would be able to develop new models to replace Rover's ageing small car range and reverse its decline in sales.

Tony Woodley of the Tranport and General Workers Union told the BBC that the EU's decision was totally unjustified, and would put thousands of jobs at risk.

Legal doubts

Doubts about the deal surfaced almost at once.

Under EU law, governments are only allowed to give fresh aid to industry if they can prove that the jobs would leave the European Union if they do not provide the help.

At the time BMW had said it was investigating an alternative location for production of Rovers in Hungary.

But the BBC has learned that the European Commission remains sceptical that Hungary was ever a real option for Rover.

Its competition directorate now wants to investigate the deal.

The UK government has been trying to persuade them to hold off, and has even considering redrafting its aid application to get round their objections.

The news will be a political embarrassment for Trade Secretary Stephen Byers, who fought long and hard for the deal, and gained assurances from the unions that they would agree to productivity improvements in return.

On Wednesday, the Rover trade unions went to Brussels to urge the Commission not to launch an investigation.

Now BMW, which fought long and hard for the subsidies, might be tempted to finally give up its attempt to modernise Longbridge after years of losses which have hurt the German company's earnings.

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See also:
06 Dec 99 |  Business
Rover aid rethink
29 Oct 99 |  Business
Rover - a car firm's troubles
23 Jun 99 |  The Company File
Rover rescue deal secured
24 Nov 99 |  UK Politics
Firms deny threat to quit UK

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