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Last Updated: Sunday, 4 March 2007, 17:55 GMT
Rolls-Royce changes gear
By Jorn Madslien
Business reporter, BBC News, Goodwood, Sussex

Ian Robertson, chief executive, Rolls-Royce Motor Cars
Mr Robertson Rolls-Royce's operations are profitable

As Rolls-Royce Motor Cars prepares for the European premiere of its convertible at the Geneva Motors Show this week, chief executive Ian Robertson is on good form.

The Phantom Drophead Coupe is seen as a crucial sales driver that should help the BMW-owned luxury car maker leave its troubled early years behind.

This year, earnings are set to rise some 30% compared with last year, faster than the sales which reached more than 800 cars in 2006.

"The Phantom is profitable in its own right," says Mr Robertson, as he gazes out of the window where diggers are moving a huge mound of earth to add 350 car parking spaces.

Sometime around the end of this decade, the launch of a smaller, cheaper and sportier "Baby Rolls" - codenamed RR4 - should help further boost the company's bottom line.

"And as we go to the smaller car the volume will rise dramatically. We will put on a second shift.

"An exciting period of continued growth lies ahead."

Rolls-Royce on a roll

The "Baby Rolls" will be targeting a gap in the market.

It will be pitched above the increasingly crowded sub-200,000 euro segment - occupied by the likes of former sister marque Bentley Continental GT alongside various Porsches, Aston Martins and Ferraris.

Yet it will cost less than cars in the high-end segment where the Rolls-Royce Phantom has established itself as the market leader, targeting buyers willing to spend anything from 300,000 to 1.5m euros on a car.

See how Rolls-Royce Motor Cars are built at the company's Goodwood factory

Priced at 200,000 to 300,000 euros, the RR4 "will still be a pretty expensive motor car", Mr Robertson points out, but he is loath to reveal any sales predictions for the model.

There are good reasons for this.

Although Phantom sales have strengthened consistently since German parent BMW Group relaunched it in 2003, it seems unlikely that it will ever reach the initial target of 1,000 Phantoms a year during the model's life cycle, which was initially forecast to last 12 years.

Such overly optimistic sales predictions, coupled with disappointing early sales, sparked turbulence in the chief's office.

When Mr Robertson was pulled over from BMW South Africa he was to be the fourth chief executive during the BMW subsidiary's short life.

By then, it was clear that although the Phantom was gradually bedding itself in - not least thanks to strengthening demand from China - it would take a long time before BMW's initial 105m investment in the marque and factory would be recouped.

Inevitably, costs would need to be cut and the model line-up expanded.

Indeed, the RR4 may well be just one of several new Rolls-Royce models to emerge in the years ahead.

"It doesn't stop here," says Mr Robertson. "There's more to come. As a company, we have more ideas than we have the ability to resource."

Unpredictable customers

Funding new projects would require backing from Munich, and Mr Robertson points out that Rolls-Royce competes with other BMW divisions for the same pool of resources.

Though a tour of the shop floor makes it clear that much of the investment has been made already.

Rolls-Royce Phantom

There is plenty of space on the manual assembly line, and the wood and leather operations have long been up and running.

The company is well into an apprentice recruitment process that should add some 30 people to its 550-strong workforce by the end of this year.

Add to that BMW's engineering and technology expertise, which Rolls-Royce can access freely, and it becomes clear that the marginal cost of further models will be just that - therefore making its cars more likely to be profitable.

But there is a catch: ever since BMW took over the marque, Rolls-Royce has been operating in uncharted waters.

Indeed, predicting the level of demand for Rolls-Royce's cars remains extremely tricky. Last year, the company expected to sell just 50 stretched Phantoms - it sold 160, mainly thanks to the "particularly chauffeur driven" Asia Pacific market.

No easy option

Rolls-Royce Phantom
Phantom sales have picked up but still fall short of early hopes

"Most of the cars we make are dedicated to customer orders," says Mr Robertson, pointing to the flexibility offered by a manufacturing process so heavily weighted towards manual operations by skilled craftsmen.

But more importantly: BMW's initial decisions to build an expensive factory on Earl of March and Kinrara's Goodwood Estate in Sussex then engineer a brand new car from scratch, is proof of its commitment to Rolls-Royce's future, he believes.

"BMW could have taken a range of easy options here," he says.

"They didn't have to build it at an estate in the South of England. It could have been tucked on as a shed to a factory. They could have taken a 7 (BMW 7-series) and stretched and rebadged it."

In the end, Mr Robertson believes, nothing less would have sufficed if the value of the Rolls-Royce marque was to be maintained.

"The excitement of owning a Rolls-Royce is supported by what you see here," he says.

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