Just-auto’s initial response to the news that the Phoenix bid has succeeded
The news that the Phoenix consortium’s bid has finally succeeded will be greeted with a big sigh of relief – and not only at Longbridge. That news is certainly good for the workers at Longbridge, the many component suppliers to Rover, Rover dealers and also the BMW shareholders who have finally offloaded the ‘English Patient’ and put an end to the stream of financial losses. That it has been something of a debacle is not in question. But now, all parties should be able to draw a line under the affair and look forward.
For Rover, the relief over the success of the Phoenix bid must be tempered by the realisation that some hard work lays ahead. Employment loss at Longbridge will still be substantial, even under Phoenix. The plan to reduce costs must be carried out as quickly and painlessly as possible. Longbridge is not one of the auto industry’s more efficient plants and producing mass market cars able to compete successfully with the likes of the VW Golf will be a major challenge. The bumper sales for Rover in the UK in April show what can be achieved with more sensible pricing. However, it would be wise not to be too carried away on a wave of euphoria. Making profits will require some rejuvenation of the Rover brand, as well as extensive cost reduction measures. Ultimately, new models are needed to replace the 25 and 45 ranges. A technology sharing relationship with another manufacturer is a necessity to achieve that at viable cost. While that development work may, for the moment, be put aside due to the need for short-term stabilisation, it will become an increasingly pressing issue over the next year or so. The 75 may be a good car, but marketing a Rover in the executive car segment was never going to be easy. Image is not quite everything, but counts for a lot. A lifeline has been thrown, but Rover is not out of the woods.
For BMW, a future as an independent producer of upscale cars is in question. Of course, BMW is a highly respected and reputable brand. Certainly, many other makers have coveted that brand in the past. Were the shareholders to signal a willingness to sell, there would be no shortage of interest. While the company’s range of executive, luxury and sports cars looks strong, there is a feeling that the company may be too small to succeed in the long run. It is argued that other bigger players with greater resources, especially arch-rival DaimlerChrysler, are better placed in the long run and will take sales away from BMW. Looking forward, it is hard to avoid that conclusion.
While BMW’s acquisition of Rover has brought some benefits – most notable in gaining four-wheel drive technology, retaining the Mini brand and also, potentially, the R30 lower medium front drive car – the association has turned out to be a pretty heavy negative. The involvement has been expensive and a catalogue of bad management decisions emanating from Munich are well-documented. While Mercedes-Benz has grown into DaimlerChrysler and extended its product lines, BMW finds itself retrenching. The shareholders will not be happy. Heads have already rolled over Rover and more may go. It is said that if the owners want to sell the company, they will be very careful who they sell to. Their long association with BMW will make it an emotional decision. An American buyer may well not be politically acceptable in Germany. If that is so, the chances for Volkswagen to extend its brand portfolio still further can only increase. Mr Piech can afford to play a waiting game.