One of the joys of being able to trawl through the news archives of our favourite car manufacturer is being able to pinpoint when the course of history irrevocably changed.
In the year 2000, we were told by those who were much more intelligent than us British car enthusiasts, that the Rover brand was dead, and had been deceased since way before BMW had stumped up £800 million to take it off British Aerospace’s hands in early 1994.
However, they didn’t tell us that in 1994 – in fact, a glance at the newspaper articles reveals exactly the opposite, that for £800 million BMW had got themselves a bargain and that Rover had been undervalued. Rover had continued to go from strength to strength, with Land Rover excelling all expectations. Although the volume car business was still loss-making, the company was arguably Europe’s most efficient car producer. It was hailed by politicians of all sides as an example of successful British industry.
The unions had won a pacesetting pay rise, and a new model development programme meant Rover had created 3000 jobs in a little more than two years. Bernd Pischetsrieder, the BMW Chairman, had said he intended to take Rover up- market, producing more exclusive models and reducing dependency on the domestic market.
John Towers (above), Rover’s then-Chief Executive, would not talk about which products and plans were on the drawing board, other than to say: ’In a world that sells very good ordinary cars we have got to create extraordinary cars.’ The media claimed that the long-term strategy was to reduce Rover’s dependency on the UK, where about four out of every five of its cars were sold. That would mean strengthening the company’s position in traditionally weak European markets.
In January 1995, Towers declared: ‘Rover Group has continued its export-led success during 1994 despite continuing economic difficulties in a number of markets and unrelenting competitive pressures.’
Rover was the pride of British manufacturing and had successfully pushed its Anglo-Japanese cars into continental Europe. A Rover in 1995 was that something a little different from your average Eurobox and, perhaps, appealed to the same kind of people who bought Saabs and Volvos. It was this sales appeal that attracted BMW.
John Towers said Rover’s sales were increasing in BMW strongholds such as Austria, Germany and Switzerland, where Rover sold 13,000 cars in 1994 in a market of 3.5 million. Rover’s output rose 16 per cent in 1994 to 478,000 vehicles, its best performance since 1989. Demand in mainland Europe rose 16 per cent, against only 3 per cent in Britain. The Independent newspaper wrote: ‘There is no question that the future of the group, not just Land Rover, is more secure than for many years.’
This was clearly not a dead brand. So how and why did it all go wrong?
In March 1995, Rover tried to buy Unipart for £300 million. They were rejected. The same month the MGF was announced. The media expected the new MG sports car to re-enter the lucrative American market. This was, perhaps, the moment when BMW began to mis-manage its Rover brand, because the MGF was never sold Stateside since it threatened sales of its parent company’s Z3, which was manufactured in South Carolina. Sales were going begging and, otherwise, the MGF could have sold twice as many units per year.
The HHR Rover 400 was announced at the end of March 1995 and, although it has received a lot of criticism on this site, it did sell very well, particularly in 1996 and 1997. In early April 1995, John Towers announced that the Rover Group had made £83m before interest and tax in 1994, its best profit for many years and an increase of £45m over 1993. Yet, by September 1995, Rover appeared to be in trouble.
BMW had tried to run its UK subsidiary at arm’s length for 18 months. Now BMW had decided that this was a mistake and installed a new Rover Chairman, Dr Wolfgang Reitzle, a hands-on manager and reputedly a hard man. Suddenly, from being one of Europe’s best performers in 1994, Rover was now one of the worst.
The latest figures showed Rover took only 10.22 per cent of the key month of August 1995, down from 10.91 per cent in 1994. Its share of the market for the first eight months of 1995 was 11.03 per cent, compared with 12.22 per cent for the same period in 1994. 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.
However, total European sales in 1994 had also fallen, by 13 per cent to 190,000 models. Rover said the sales decline was due to the ending of Maestro and Montego production – in fact, most of the range was suffering. 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.’
In October 1995, the R3 third generation Rover 200 (above) was launched. John Towers, said: ‘This is our strongest presence in the medium sector. Within 12 months we have transformed our range.’
Rover, despite its investments in marques, faced a tough task. The company’s UK market share had fallen from 12.4 per cent to 11.3 per cent in the first nine months of 1995, and the company had done little better in continental Europe. But, again like the new HHR Rover 400, the R3 200 sold well. In 1997, Longbridge produced 343,157 cars, its best total since the 1960s, and 263,551 were the R3 and HHR models.
In December John Towers gave an interview to the New York Times, a newspaper whose readers were unable to buy a Rover car. John Towers conceded that Rover’s new hard line on discounting and the steady erosion of its European market share that this policy had caused, had raised concerns. Rover’s European car sales in the first 10 months of 1995 slumped 8.6 per cent from a year earlier, cutting its market share to just 3.0 per cent. In the face of such numbers, John Towers said, ‘There is a temptation to say, “Oh my God, go ahead and sell some at a discount”.’
That, then, was 1995, the year it began to go pear-shaped for Rover. Perhaps the star performer was the Rover 600 saloon, 61,413 were manufactured that year. By the end of April 1996 John Towers had quit and BMW had appointed in his place Walter Hasselkus.
In my analysis of the BMW years, there was no mention in the media of the fact that BMW had to pay royalties to Honda for each Rover sold with Honda DNA in its make up – probably the BMW shareholders were ignorant of this as well. In 1996, production of the heavily Honda-based Rover 600 slumped to 43,701.
Some would argue that BMW were reluctant to advertise the car because of the royalty payments it incurred. After 1995, BMW made the mistake of airing its dirty laundry in public, which only served to discredit the Rover brand in the eyes of its potential customers. In terms of sales, the Rover Group’s best year was still ahead, 1997, but BMW’s panic driven reaction to the strength of Sterling from 1998 onwards helped seal the fate of the Rover brand.