Full statement by BMW on its break-up of Rover Cars.
The Board of Management of the BMW Group has decided this week on the principal considerations in reorienting the Company and the Supervisory Board today agreed to the new strategy. This means that the BMW Group will be focusing on brands witch already have a leading position in their respective segments.
The distribution of the Rover and MG brands as well as their production facilities for these vehicles in Birmingham are to be maintained and continued by Alchemy Partners. Negotiations have started on the basis of an offer submitted by Alchemy Partners for this purpose.
All-new BMW model series
The BMW brand is currently as strong as hardly any other car brand the world over. Now the BMW Group will capitalise on and further expand this postion of strength. The BMW Group has therefore decided to build on all-new model series under the BMW brand for the upper end of the lower midrange segment. The decision on where this model series will be built has not yet been taken.
Prof. Dr.-Ing. Joachim Milberg, the Chairman of the Board of the BMW Group, announced this new development in Munich on Thursday: “The new model series will consistently expand and strengthen BMW´s entry-level position with the BMW standard. It will be a typical BMW! And it will therefore occupy and maintain a unique position in the upper part of the lower midsize range.”
Restructuring of the Group’s corporate units in Great Britain
In this process of reorientation of the BMW Group, the corporate units belonging to Rover Group Ltd. are to be restructured. The Rover and MG brands as well as the production facilities for these vehicles in Birmingham are to be continued by Alchemy Partners. Negotiations have already started on the basis of an offer submitted by Alchemy Partners for this purpose.
The BMW Group will continue to supply Alchemy Partners with the Rover 75 on the basis of a job contract. For a certain period of transition the BMW Group will furthermore support Alchemy Partners in all necessary areas.
Milberg: “We will do this in order to provide the quality of support. On that our customers can rely.”
Following successful conclusion of the negotiations the Rover and MG brands will be regrouped together within a new company under British management. The original strategy was to compete through the Rover brand with mass-produced cars in the lower midrange segment.
According to Professor Milberg, however, this Rover strategy within the BMW Group has turned out to be inappropriate for various reasons. Although the Rover turnaround was successful last year, the constant increase in the value of the British Pound has more than set off this success. Again to quote Milberg: “A further point is that the product offensive we initiated with the Rover 75, 25 and 45 was not as successful as we had hoped.”
Yet a further point was that new investments of the amount foreseen at the Birmingham Plant, in particular for a new lower midrange Rover, had to be reviewed and considered more conservatively due to the high value of the British pound.
With exchange rates versus the pound continuing to decline, mass producers on the European Continent have a growing advantage in competition. Precisely this is why the Board of Management has decided to take a clear and consistent step. Milberg: “Even with an extreme increase in productivity or through an extreme shift in sourcing into Euroland, we would no longer have been able to set off such burdens beyond our control.”
Reorientation of the BMW Group – Summary:
- Responsibility for the Rover and MG brands, for the Birmingham Plant, and for sales of the cars built in Birmingham is to be assumed by a new owner. Negotiations have already started on the basis of an offer submitted by Alchemy Partners and we wish to quickly wind up these negotiation with a successful result.
- Investments for the production of the new MINI in Birmingham are being stopped and will be continued instead at the Oxford Plant. The new MINI will be launched into the market in early summer 2001.
- Production of the Rover 75 will be continued at the Oxford Plant on behalf of Alchemy Partners. Sales and distribution of the car will then be handled by Alchemy Partners itself.
- An all-new model series will be developed within the BMW brand for the upper end of the lower midrange segment. This model series will then hold a special, unique position in that part of the market.
- The BMW Group’s new engine plant in Hams Hall in the British Midlands will be completed and enter operation as planned.
- The Group’s plans regarding the location of the plant in Britain for production of an all-new Rolls-Royce as of 2003 are not affected by this reorientation.
- The Board of Management submitted this reorientation of the Group to the Supervisory Board on 16 March and the Supervisory Board expressed their approval.
Reorganisation of the Board
The Supervisory Board has decided on a reorganisation of the Board of Management: Dr. Burkhard Göschel (54) and Dr. Norbert Reithofer (43) have been appointed to the Board of Management with immediate effect. Burkhard Göschel will assume responsibility for Research and Development; Norbert Reithofer will take over production.
Dr. Henrich Heitmann (58), so far responsible for sales and marketing, Dr. Wolfgang Ziebart (50), so far responsible for research and development, and Carl-Peter Forster (45), so far responsible for production, have resigned with immediate effect. The Supervisory Board thanked these gentlemen for their commitment to the company.
Pending the appointment of a new board member for sales and marketing, the sales functions will be taken care of by Professor Joachim Milberg (marketing) and Dr. Helmut Panke (sales) – while maintaining their regular executive functions.
Professor Milberg stated: “With the new team, we will put the reorientation of the BMW Group appropriately into practice”.
Extraordinary expenditures on Rover leads to a deficit for the year despite the highest annual surplus ever. In the same Ordinary Meeting the Supervisory Board examined and approved the 1999 Annual Accounts and Balance Sheet.
Despite the deteriorating result in the Rover Car segment in 1999, the result of the BMW Group’s ordinary business was up by 4.7 per cent to euro 1,111 million (previous year: euro 1,061 million). Following deduction of profit-related and other taxes amounting to euro 448 million, the BMW Group’s annual net surplus amounts to euro 663 million (previous year: euro 462 million) prior to this year’s extraordinary result, representing the largest annual net surplus ever achieved by the Group, an increase by 43.5 per cent over the previous year.
The BMW Group has made far-reaching provisions for the restructuring processes required and any further risks foreseeable with Rover. Amounting to euro 3,150 million, this extraordinary expenditure leads to a deficit for the year of euro 2,487 million.
BMW Automobiles segment improved once again The result of ordinary business in the BMW Automobiles segment has improved over the already excellent figure achieved last year by another 5.1 per cent to euro 2,106 million (previous year: euro 2,003 million).
By contrast, losses in the segment of Rover Automobiles were up by euro 250 million to euro 1,207 million (+ 26.1%) on account of conditions in the market, the influence of the exchange rate, and restructuring measures. In the BMW Motorcycle segment business results have continued to improve, increasing by 12.5 per cent to euro 18 million (previous year: euro 16 million).
This year the BMW Group is reporting for the last time on business activities in the Aero Engine segment. With the process of converting from a development to a production company being completed in 1999, the loss sustained by BMW Rolls-Royce has dropped considerably by 37.6 per cent to euro 146 million (previous year: euro -234 million).
Since the beginning of this year the company has been a subsidiary of Rolls-Royce plc and has been re-established under the name Rolls-Royce Deutschland GmbH. Financial Services are continuing to develop positively, the result generated by this segment of the BMW Group increasing by 6 per cent to euro 316 million (previous year: euro 298 million).
Dividend remaining stable
The annual net surplus of BMW AG amounts to euro 269 million (previous year: euro 234 million) and was generated through the Company’s operative business.
The Board of Management and the Supervisory Board advise the Annual General Meeting to pay a dividend of euro 0.40 per ordinary share and euro 0.42 per preferred share for a nominal amount in each case of euro 1.00 on the equity entitled to dividends of euro 622.2 million ordinary stock and euro 47.2 million preferred stock, thus using the balance sheet profit of BMW AG of euro 269 million (previous year: euro 234 million) to maintain a 40 per cent dividend on ordinary stock and 42 per cent on preferred stock also after the changeover to a nominal stock value of euro 1.00.
The business result of the Company – before extraordinary expenditures – according to the German DVFA valuation method is euro 677 million (previous year: euro 518 million).
BMW Group turnover up once again in 1999
Turnover of the BMW Group in the 1999 year of business was euro 34,402 million (previous year: euro 32,280 million), equal to an increase by 6.6 per cent over the previous year. This is primarily due to the increase in BMW vehicles sales as well as the ongoing trend towards a higher level of equipment in the cars sold.
Investments once again financed by cash flow
BMW Group investments last year amounted to euro 2,155 million (previous year: euro 2,179 million), thus remaining at virtually the same level already recorded one year before. These funds were invested in the preparation of new models, the modernisation and expansion of production, and the reinforcement of the international sales and distribution network. The BMW Group continues to be in a leading position in the automotive industry in terms of its investment volume.
As in previous years, these investments were financed in full out of the Group’s cash flow (euro 2,807 million).