Car industry: BMW’s newly-appointed hard man expected to make waves during restructuring
Stung by British hostility towards its takeover of Rover, Germany’s BMW had tried to run the UK volume car maker at arm’s length for 18 months. This week BMW decided that this was a mistake and installed a new Rover chairman, Dr Wolfgang Reitzle, a hands-on manager and reputedly a hard man who no one doubts will make waves.
From being one of Europe’s best performers last year, Rover is now one of the worst. But Rover’s poor sales are symptomatic of a deeper malaise, one that has been causing serious concern at BMW since it paid British Aerospace £529m for the company. Disputes with car dealers, lacklustre models, and confusion about exactly where Rover wants to position itself in a crowded marketplace, are at the heart of the problem.
Figures out earlier this week showed Rover took only 10.22 per cent of the key month of August, down from 10.91 per cent last year. Its share of the market for the first eight months of this year is 11.03 per cent, compared with 12.22 per cent for the same period in 1994.
The underlying problems in the volume car business are made all the more stark because the figures include growing sales at Land Rover, the only real bright spot in the group. John Towers, Rover’s chief executive, had said the decline in UK sales was because the company wanted to reduce its dependence on the home market and expand in mainland Europe. Yet total European sales this year have also fallen, by 13 per cent to 190,000 models.
Rover says the sales decline is due to the ending of Maestro and Montego production. But in fact most of the range is suffering, and in the last week or two Rover’s market share is believed to have slumped into single figures. BMW’s strategy is to move Rover away from the volume car business into the higher-margin, up-market category dominated by the likes of BMW itself.
A new generation of models is planned but such changes are slow to come through and, in the meantime, they are causing problems with Rover dealers. One dealer said: “Take the Rover 400. It is a smaller car being positioned in a higher bracket because Rover has raised the specifications. So we now have the Rover hatchback being positioned against the Ford Mondeo.
“In times like these dealers are finding it hard to shift the product. The Rover range lacks excitement when it is pitched against some of the competition.” Dealers’ margins have been cut to the bone, and Rover has done nothing to relieve the pressure with the sort of marketing incentives and leasing plans on offer from its rivals. Fleet business has been turned away.
Another dealer said that Rover, once flexible about showrooms selling rival models or used cars on the same site, had hardened its attitude. “The quality of the manufacturer-dealer relationship is no longer there,” he said. This is borne out by attitude surveys conducted by the Retail Motor Industry Federation which show that dealers’ faith in Rover has fallen fast.
Dr Reitzle, number two in the BMW group, is expected to take a tough management line, and that could cause friction between him and the likeable and highly-regarded John Towers. Mr Towers is believed to have initially been against the BMW purchase, and was not happy about the way Rover’s long-time partner, Honda, was dumped.
Rover has been successful in stripping out cost, and recently returned operating profits of £83m, but that is largely due to Land Rover’s success. Dr Reitzle is expected to come down still further on costs, and there are strong rumours that Rover is about to cut its dealership network, which has already been reduced from 1,200 to 650 outlets, because of the fall in sales.
Road test: The judgement on Rover’s cars
Brought out at the beginning of this year as a replacement for the popular Metro. K-series engine is good, but car now somewhat old- fashioned and suffers in comparison with more sprightly rivals such as Renault Clio and Peugeot 106. Metro made regular appearences in top 10 sellers lists but Rover 100 has made the top 10 only rarely.
Rover fans keenly await the new model out in the new year. Current model seventh in the top-selling list for the first eight months of 1995.
May have been priced too high and wrongly pitted against the Ford Mondeo when it was really more a Ford Escort or Vauxhall Astra- type car. New four-door saloon version being launched at Frankfurt motor show next week could revive the fortunes of this model.
Well thought-of. New version due in 1997 will show the first fruits of the BMW-Rover partnership.
A bit stale. Needs up-dating but no new version expected in the near future.
Sales of the Discovery and Range Rover were disappointing last month. The Discovery has developed a number of faults although Rover has scotched reports that warranty faults have cost up to £1,500 to fix, saying the average warranty bill was £150.