BMW is reportedly losing one billion pounds a year at Rover. Much of that is one-offs, caused by an extensive redundancy programme, but a lot of it is due to the strength of the pound and the fact that Rover is an inefficient car maker which needs massive investment to bring it up to German standards.
By all accounts BMW is getting fed up with the costs involved and certainly sees no end to the losses caused by the strength of the pound. So what can or will it do?
For BMW the best option is probably to cherry pick. The new Mini and LandRover – the four wheel drive arm of Rover – are likely to be the profitable parts and BMW could well hang on to them and get rid of the rest. But that is not the best option for Rover by a long way.
It would leave BMW trying to find a buyer for the remaining parts of Rover. They are the parts which are not profitable, and are most in need of the massive investment that BMW seems to be balking at. BMW is reported to be keen to sell those parts of Rover and may have lined up an unspecified buyer, described as not one of the major car companies.
But the car industry is in a period of intense international competition. It is difficult to see what kind of company would want to take over a troubled car maker and try to take on the world. Mayflower, an engineering group which makes buses, is rumoured to be interested but will neither confirm nor deny the story.
But the other option is even darker, to close the loss-making parts of Rover. That would mean almost 10,000 job losses at Rover’s Longbridge plant alone and many more in the industries that support it. Of course BMW might just decide to bite the bullet and continue to try to turn Rover around, but it has been trying to do that since 1994 when it bought the company.
It has cost one chief executive at BMW his job and industry analysts say the losses make the German carmaker itself vulnerable to a take-over bid.
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