VW to put up £1bn for Rover

By RICHARD HALSTEAD
Updated:

 

Rover's troubled Longbridge factory in the West Midlands has been offered an extraordinary £1 billion deal by rival Volkswagen that could lead to VW taking control of the plant.

Rover's German bosses at parent BMW are considering the co-operation agreement.

The plans were outlined during the summer in meetings between VW chairman Ferdinand Piech and his opposite number at BMW, Bernd Pischetsrieder.

They arose as part of the discussion following VW's £470 million acquisition of BMW's

Rolls-Royce Motor Cars.

The moves are part of Piech's long-term ambition to win control of BMW and become the largest car maker in the world, according to industry experts.

Under the Piech proposals, VW would initially co-operate with Rover by providing production technology to build a planned replacement for the 200/400 Rover series, scheduled for launch in 2002.

It would also share some of the cost of development, which is expected to be aided by government grants of about £200 million.

Last week 14,000 Rover workers at Longbridge voted to accept new working practices in return for a promised £2.4 billion investment by BMW to develop a new Mini and the new Rover model, codenamed R55.

But if VW gains a foothold at Longbridge, it is likely to seek control of the plant and use it to produce Volkswagens for the UK market.

It may also develop a new sports car with BMW, reviving either the famous Riley or Austin-Healey marque.

Professor Garel Rhys, head of economics at Cardiff Business School and a veteran observer of the motor industry, said: 'BMW is at a crossroads. If the board in Munich continues to show that it cannot cope with a crisis, we will see Longbridge become a BMW/VW joint venture.' Pischetsrieder rejected VW's approaches in August, but the offer is still on the table and may seem more attractive after the resignation of Rover boss - and Pischetsrieder ally - Walter Hasselkus last week.

Hasselkus was not taking any calls at his office, Rover said on Friday. At his five-bedroom detached home in exclusive Boar's Hill, not far from Rover's Cowley plant near Oxford, his wife said he would be working out his notice and handing over to his replacement, Werner Samann, by Christmas.

The BMW board faces turmoil over the losses at Rover, which are expected to top £300 million this year.

Pischetsrieder's position is under threat from hawks on the BMW board who believe the Rover investment is turning into an expensive folly that will drag down the profitability of the group.

Last month Rover's UK market share fell to a historic low of 6.5%, below Peugeot (7%), Renault (8.74%) and Volkswagen (6.68%), and production this calendar year is not expected to exceed 400,000 cars.

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