German car giant BMW has denied reports in UK newspapers that it may scrap plans to invest £1.7bn ($2.7bn) at its Rover car factory in Longbridge if the pound stays strong. Peter Forster, BMW’s head of production, had been quoted by the Guardian and Independent newspapers as saying that BMW’s investment plans for the Birmingham plant could be at risk.
Speaking during the Geneva motor show Mr Forster told the journalists that the “strong pound step by step erodes the manufacturing base and makes it increasingly difficult to manufacture in the UK”. However, BMW Group spokesman Juerg Dinner insisted that Mr Forster had only described the overall problems of UK manufacturing sector.
Mr Dinner told BBC News Online that BMW was “fully committed” to Longbridge: “There is no question about future investment plans at the Birmingham site.”
Moving profit target
On Monday, the Birmingham Post newspaper had quoted Mr Forster as saying that the modernisation of Longbridge would go ahead even if the European Commission does not approve a £152m aid package promised by the UK government. Mr Dinner said BMW was confident that the aid would be forthcoming and refused to speculate on what would happen if it did not materialise.
Nonetheless, the strength of the pound has obviously been a big concern for BMW. It currently trades 40% higher than when BMW bought Rover six years ago.
BMW has given its British subsidiary until 2002 to “break even” – the point when revenues are higher than costs. Mr Dinner said the strong pound would “make it even more difficult” to reach the break-even point at that date, but insisted it would be possible. During the past 14 months, the pound – in line with the US dollar – has steadily strengthened against Europe’s single currency.
This has put UK exporters at a serious disadvantage with their continental rivals.
The papers also reported that Rover workers would have to brace themselves for cuts of up to a further 5,000 jobs. In 1999, Rover cut its workforce by about 9,000 people. Again, BMW says the journalists got it wrong. Mr Dinner said there were “currently no plans for further significant reductions of the workforce in Birmingham”.
It is not the first time that BMW has accused journalists of misquoting its executives. In January the respected German newspaper Sueddeutsche Zeitung had reported that BMW was considering to close down Rover completely if the company did not manage a quick turnaround.
According to the paper BMW’s sales chief Henrich Heitmann had warned that BMW “won’t have the time we need” to re-establish the Rover brand. BMW denied that he had made such comments.
Rolls-Royce a UK car
Earlier this week, BMW was hit by a rumour that it planned to move production of its line of Rolls-Royce cars to Germany. The company has rubbished the report, and promises that the new Rolls-Royce will be built in the UK. Two years ago, BMW bought the rights to the Rolls-Royce car brand, after it lost the battle to buy the Rolls-Royce car factory to Volkswagen.
The new Rolls-Royce is scheduled to go on sale in 2003.