So where now for Rover? Or should that be Rovers? Or not Rover at all, as Ford has now snaffled the Rover nameplate, depriving both Shanghai Automotive and Nanjing Automotive of the chance to revive the failed British brand, writes Mark Bursa.
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Ford simply exercised a clause in its year 2000 deal with BMW to buy Land Rover, which allowed it first refusal on the brand if BMW wanted to sell. Ford says the deal is to protect Land Rover. Certainly Ford won’t revive Rover – it has enough ailing British brands already – but it could use the Rover name on future niche models, as it already does with Range Rover.
The deal is the latest development in a saga with more twists than Chubby Checker eating a bowl of fusilli pasta. Once the dust settled and receiver PricewaterhouseCoopers had done its job – sort of – Nanjing was left with the assets of Rover, including production equipment for both cars and engines, the rights for the MG TF sports car and the MG name, while SAIC retained the intellectual property rights to the Rover 75 and 25, plus the unfinished ‘project X60’ – the 45 replacement – and the K-series engine. SAIC had bought these assets as part of a deal to keep Rover afloat during abortive takeover talks.
Since then the wrangling has continued. Nanjing has announced it will build cars not just in China – but also at Longbridge in the UK and Oklahoma in the US. It will use the MG brand internationally and revive the defunct Austin name in China.
But SAIC has threatened to block its rival, and says it will launch its own version of the Rover 75 in 2007. It could use its own name in China, but it’ll have to find a new brand for overseas markets. Ssangyong is a possibility; SAIC bought the Korean brand last year and has put former GM China boss Phil Murtaugh in charge.
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By GlobalDataBut SAIC can probably do better – indeed, losing the Rover nameplate may turn out to be a blessing in disguise. The brand was hardly a global success story even at the best of times, and following the collapse it seems irrevocably tainted with failure. If SAIC is smart, it’ll hold off from exporting the cars until it has something approaching a full range and a well thought-out international brand.
SAIC has seen the independents such as Chery, Geely and Great Wall steal a march on it in terms of export strategy and international recognition. But these are much, much smaller companies than SAIC, whose industrial reach is far greater than its joint ventures with GM and Volkswagen.
And SAIC is certainly not short of ambition. It has already announced plans to make 600,000 “own brand” vehicles a year by 2010 in addition to the GM and VW JVs. SAIC has ploughed US$460m setting up a new division to build these cars and has set aside a further US$1.2bn to develop this project, which involves “more than 30 models” between 2007-2010 – including revived ex-Rovers and new Ssangyongs.
Nanjing, meanwhile, has brands. Plenty of them, in fact. As well as MG, China’s longest-established car maker acquired the rights to a number of other former British Leyland nameplates in the MG Rover fire sale: the worldwide rights to Austin; the rights to Wolseley, Morris and Vanden Plas anywhere in the world except the US and Canada; and the US rights to the Princess and Sterling names.
MG will become the main global brand, while Austin, rather like GM’s Buick brand, has surprising amounts of goodwill in China, and will be used for domestic products. It’s hard to see many of the others making a comeback immediately, though Vanden Plas surely has legs as a potential future luxury brand.
Nanjing says it will start production in China next year. It is building a new 290,000sq m factory in the high-level new technology economic development zone in Pukou, a district of Nanjing. The Nanjing-MG factory is scheduled to be ready to produce cars by the year end. It will eventually have a capacity of 200,000 cars, plus 250,000 engines and 100,000 gearboxes.
The company even has a branding strategy for the car range worked out, claiming the cars will be renamed so the MG ZT (Rover 75) becomes the MG 7Z; the MG ZR (Rover 25) becomes the MG 3Z; the MG TF becomes the MG WZ. By 2011, Nanjing claims it will be making 85,000 MG 7Zs and 25,000 MG WZs in China, in addition to 20,000 Z7s and WZs at Longbridge and up to 16,000 WZs in Oklahoma.
Intriguingly, Nanjing says it will build the MG ZS (Rover 45) in China as well, calling this the MG 5Z. But this plan will have problems: the Rover 45 was based on the Honda Civic, and Honda cancelled any rights to build this car the moment MG Rover went bust. Nanjing owns the jigs and tools to make the car, but it can expect a lawsuit from Honda if it tries.
Whether Nanjing will receive a lawsuit from SAIC is another matter. Industry sources claim there are loopholes in the deal between Rover and SAIC that gave SAIC the intellectual property rights. It’s unclear whether the MG versions were included in the deal – and given the vague nature of Chinese copyright law, it looks likely that there will be two versions of the same car range on the roads of China next year.
Attempts by the Chinese government to get SAIC and Nanjing to cooperate have apparently fallen on deaf ears chez Nanjing. Collaboration between the two had been the original plan before Rover’s collapse, but the two companies fell out somewhat acrimoniously. Nanjing is much smaller than SAIC and fears it would be swallowed up in any collaboration deal.
A restart in Longbridge still depends on a strategic partnership being struck with a UK company. Nanjing is not cash-rich, and is unwilling to proceed with a further UK investment – it has already spent US$100m on MG Rover assets – without a risk-sharing partner. GB Sports Car, one of the failed bidders for Rover, is still in talks and remains the likely partner.
The deal moved closer last month when Nanjing signed a 33-year lease deal on part of the Longbridge site. Under the plan, Longbridge would make MG sports cars, and would finish off part-built Chinese 7Z models for sale in Europe, adding higher specification components.
Nanjing’s plans to build a factory in Ardmore, Oklahoma, seem a little more far-fetched. Nanjing is banking on an established US fan base for MG dating back to the 1960s and ‘70s, when the cars were sold there. But even an updated TF – including the coupe version that was ready to be built when Rover failed – is an old design dating from the early 1990s, compared with newer rivals such as the Mazda MX-5.
It would seem that Oklahoma will build the coupe version of the rechristened MG WZ, while the rag-top will be built at Longbridge. Global output would be around 25,000 a year, with 60% of output in the US from 2008.
It’s an ambitious plan – but a flawed one, largely because it’s based around old models, with no sign of an R&D budget capable of developing replacements. And MG will surely flounder unless it comes up with new sports car models in the near future.
SAIC has those resources, and the money to out-shop design and engineering work, so while it may seem to be behind Nanjing at the moment, it’s probably the better bet for the long-term. And having lost the Rover brand, perhaps China’s biggest automaker will be even keener to get back into bed with China’s oldest, if only to get its hands on the MG brand.
Mark Bursa
See also:
CHINA: Rover name loss a blow, not fatal to SAIC
UK: Ford’s Land Rover to buy Rover name
