AROnline‘s historian-in-residence Ian Nicholls delivers his verdict on the relationship that was BMW vs Rover between 1994 and 2000…
The standard work on the downfall of Rover is End Of The Road by Chris Brady and Andrew Lorenz. Reading it, one gets the impression that the authors saw BMW’s stewardship of the Rover Group as a forlorn hope, which, in many ways, it was. In fact, it could be argued that it was long before BMW’s 1994 purchase of the British carmaker for £800m.
In Chapter 17 of the book, the authors summarised thus: ‘The strategy, in its theoretical form, was sound enough. Buy an off-the-peg volume manufacturer and keep the branding separate in order that the stronger brand would not be diluted while the new organisation concentrated on building the weaker brand.
But the strategy was less robust in practice than in theory. For one thing, the Rover brand (as opposed to Land Rover) was effectively dead. For another BMW never came to grips with the Herculean task of implementing the strategy that had driven the deal.’
The benefit of hindsight
With the benefit of hindsight, it rather looks like the authors seemed to be of the view that, if BMW could not turn Rover around, then no one could. The most contentious statement in the above passage is whether the Rover brand was really dead in 1994 when BMW bought Rover off British Aerospace.
Another more recent book is The Rover Group – Company and Cars by Land Rover insider Mike Gould – it’s an excellent work, with statistics which suggest that, what really did for Rover, was a gradual drift towards MPV/SUV/4X4 type vehicles by consumers.
The author berates the Thatcher Government for under-investing in Rover, forgetting that under the 1975 Ryder Report, British Leyland, as it then was, was meant to earn £1.5million in profit for every £1million invested by the taxpayer.
BMW vs Rover: the background
That British Leyland catastrophically failed to make a profit was down to the self-destructive forces at work within the company and which convinced Government that the whole set up was doomed to failure. The knockdown sell off to British Aerospace was all part of a strategy to rid the public purse of the burden of propping up an organisation that seemed incapable of producing cars the public wanted to buy in large numbers.
What angers so many about the BAe sell off is that, when it happened, Rover actually started to come good. Ironically, it was Margaret Thatcher’s nominee as Chairman, Graham Day, who started the process. Day introduced a more market savvy approach to the company and at last tightened up build quality, not taking at face value assurances by the ex-BMC apprentices who dominated middle management, that cars were reaching the dealers in acceptable quality.
Cowley-built cars seemed to have been the worst. It was the quality of the Maestros and Montegos built at Cowley between 1983 and 1986 (above) that effectively destroyed the British Leyland careers of Chairman Sir Austin Bide, his Deputy, Ray Horrocks, and Austin Rover Managing Director, Harold Musgrove.
Quality woes of the 1980s
It was one thing to blame the then ongoing price war between Ford and Vauxhall, but to release into the public domain cars of unacceptable quality was another – and this was at a time when new car sales were at record levels. Not surprisingly, the Thatcher Government deduced that Austin Rover was a terminal basket case and tried to offload it to Ford in 1986 before the consequent political furore resulted in a climb down and a managerial ‘Night of the long knives’ culminating in the appointment of Graham Day.
While all this had been happening, Volkswagen UK had been adopting a different strategy to the price cutting tactics of the American-owned companies. Fronted from 1975 until his retirement in 1988 by Michael Heelas, who had been one of Filmer Paradise’s disciples at Austin Morris in the early 1970s, VAG UK majored on quality and reliability in its marketing campaigns.
It was a tactic that worked and established Volkswagen as a major player in the UK car market. Even today, years after he retired, Michael Heelas is referenced on the VAG UK website.
Going upmarket under Graham Day
Graham Day decided to take a leaf out of VAG UK’s book and take British Leyland cars upmarket. The Austin marque was unceremoniously dumped in 1987. Sad though this was, as the Austin brand had adorned many iconic vehicles, more recent recipients of the badge such as the Allegro, Maestro and Montego were nothing short of sales catastrophes and seemed to symbolise all that was bad about British manufacturing. British Leyland was re-christened Rover to emphasize the move upmarket.
It was the Anglo-Japanese Rover 800 that ushered in the brief resurgence of the Rover brand. After the early quality wobbles had been fixed, the 800 became a steady seller, with the original Roy Axe-styled version selling 193,531 cars in its lifetime. This was an average of 32,255 a year, which meant it annually sold better than the outgoing Rover SD1, which had average production of 30,000 cars per year and had been plagued by quality problems.
With the 800, Rover had, at last, arrested its long term decline. In 1988, the Government finally offloaded the Rover Group to British Aerospace (BAe), which was loathed to invest in what seemed an ultimately doomed enterprise. The asset stripping began almost immediately.
In 1988, Rover announced that it was to close Cowley South Works, the original Morris Motors factory, and concentrate production in the adjacent Pressed Steel plant, a feat accomplished by 1992.
Defenders of asset stripping, like late BLMC Director Jim Slater, cite the under-utilisation of facilities for asset stripping. In this case, Austin Rover management had criminally allowed poor quality Maestros and Montegos to escape the Cowley compound and doomed both the South Works and its workforce.
It could have been so different if those cars had been subject to meaningful quality control. South Works could still be with us today, churning out BMW MINIs in even greater numbers!
Land Rover undergoes a revolution
While all this was going on, over at Land Rover, Managing Director Tony Gilroy was laying the foundations of the 21st century success of the brand. In 1986, Land Rover only produced two vehicles, the basic Land Rover 90/110 and the original Spen King-designed Range Rover – that year, Land Rover produced 35,443 vehicles, a mere 7.98 per cent of total Rover car production. It was Tony Gilroy’s efforts in widening the appeal of the Land Rover brand that would backfire on the Rover saloon car marque.
The irony was that the Solihull plant was the ancestral home to both brands. The original Rover company had managed the Solihull plant as a wartime shadow factory and moved in full time after the hostilities because of bomb damage to their original Coventry plant. It was at Solihull that the Wilks family, who dominated the Rover management, had nurtured the original Land Rover as a temporary stop gap alongside the Rover car range.
The Land Rover sold in huge numbers to farmers, the Third World and armed forces all over the world while solid Rover saloons such as the P4 appealed to the professional classes. The revolutionary Rover P6 saloon, masterminded by a team led by Peter Wilks, was the right car at the right time.
Looking to the past for a precedent
It was not just the technical prowess that made the Rover P6 a success, it was its overall package. Like the rival Triumph 2000, Rover had created a car that appealed to the fleet market. Ford Cortina-driving sales reps who were promoted to executive status could upgrade to a Rover P6 at a time when Ford’s own upmarket barges were unappealing. The P6 was the blueprint of everything a volume executive car should be.
The aging P4 saloon ceased production in 1964, leaving the P5 as the only other Rover car in production. An upmarket, luxury saloon, much improved in 1967 by the ex-Buick V8 engine, it too typified all that was best about the Rover marque.
Unfortunately, the confidence permeating Solihull seemed to fade away as the Wilks family gradually relinquished control. In December 1966 Rover was absorbed into the Leyland group and, in May 1968, it became part of British Leyland. By 1970 only Peter Wilks and his cousin, Spen King, had any influence over Solihull. The British Leyland merger resulted in many Ford UK personnel being recruited with their obsession with cost control and never mind the quality.
Cost-controlling British Leyland
Such an approach might have been valid in regard to high-volume cars like the Ford Cortina and BMC 1100/1300 but was it appropriate for more upmarket saloons?
As well as the manufacturing costs of the Issigonis front-wheel-drive range being called into question, attention was drawn to the Rover P6 and its basic chassis frame construction, onto which body panels were attached. A consequence of this was that the replacement for the P6, the Rover SD1 would be designed down to a price.
It appears no one in Rover Triumph questioned the rationale emitting from ex-Ford finance men whose previous employer was not setting the world alight with its own executive car, the leaden Zephyr/Zodiac Mk4. In addition to this, many European buyers felt that Ford’s British built-to-a-price cars were crude in comparison with rival rear-wheel-drive cars from the likes of Fiat, Opel and Peugeot.
And the rot sets in
The Rover SD1 was launched in 1976 as ‘Tomorrow’s Car Today’, its futuristic styling masking some of its less advanced features. Assembled in a new purpose-built plant adjacent to the Solihull complex and now controlled by the remote Leyland Cars, fronted by Derek Whittaker, the new SD1 should have been the car that took the Rover brand to greater heights, particularly as Britain was now a member of the Common Market and the SD1 did not have to endure the trade tariffs that had afflicted the export P6 for most of its life.
However, in the Britain of the 1970s, concepts such as ‘just-in-time’ were a joke. SD1 production was afflicted by strikes, both internal and external. Unfinished cars were stockpiled in the open, awaiting parts from strike bound suppliers, corners were cut in order to meet production targets and quality inevitably suffered. And, as Jaguar later found out, the quality of some of the bought-in components was less than sparkling. On top of this, the workforce refused to endorse the introduction of a nightshift for what, at the time, was Britain’s most-desired car.
The German-built Ford Granada arrived in 1978 and, although it looked like a Cortina on steroids, it was well built, reliable and available in a more economical 2.0-litre version as the world endured a second energy crisis. As a brand, Ford had not been in the same league as Rover, but the market preferred the Blue Oval.
Was the workforce to blame?
The SD1 debacle was blamed on the Solihull workforce but, even if a nightshift had been introduced, would the quality have been any better? Effective quality control at Solihull probably went with the abolition of the Rover board in 1975, courtesy of the Ryder Report. There was no one on site with the real authority to get a grip on quality without fear of retribution from above.
It was Sir Michael Edwardes who decided to shut down the Solihull SD1 plant, but his choice of alternative factory to build the big Rover was hardly cause for celebration – the same plant that would badly assemble all those Maestros and Montegos, Cowley!
With the final departure of Rover saloon production in 1982, Solihull became the domain of Land Rover. The Rover SD1 debacle was the first nail in the coffin of the Rover brand. Instead of establishing Rover as a top-rank manufacturer of premium executive cars to rival the likes of Audi, BMW and Mercedes-Benz, the SD1 stumbled and became an also ran, although it was a winner on the racetrack.
The Rover SD1 was meant to be a quality car, except the quality was sadly lacking – perhaps it escaped through the large panel gaps? The problems of the SD1 had the effect of diminishing the Rover brand, particularly in export markets, that BMW would have to build on.
From SD1 to Land Rover – Solihull revival
When Tony Gilroy took the helm of Land Rover he inherited the empty SD1 plant in Solihull. He decided to close down nine outlying Rover Triumph plants and transfer production into the vacant SD1 plant. One was the gearbox plant at Pengam near Cardiff, which made the LT77 transmission.
The Japanese were now making serious inroads into traditional Land Rover territory as sales of Solihull’s long-running breadwinner began to seriously decline. Land Rover did introduce improvements to the vehicle, now called the 90/110, but, as the belief that the Solihull vehicle could not match the oriental opposition for quality and reliability had taken hold, Tony Gilroy decided not to compete head on with the Japanese. Instead, he decided to move the Land Rover brand upmarket. The first stage was to turn the Range Rover, which had been starved of investment since its introduction in 1970, into a luxury car.
In doing so Solihull effectively filled the gap left by the Rover P5B, which ceased production in 1973. Rover had wanted to replace the P5B with the Rover P8, which had been cancelled by British Leyland in 1971. The reasons for this cancellation are confused. The P8 was axed because it failed crash tests or because of pressure from Jaguar’s Chairman, Sir William Lyons, who saw the P8 as a threat to his XJ saloons.
Sales slipping away
BLMC Chairman, Lord Stokes, seemed to imply in a May 1973 interview that the P8 was axed on cost grounds. As Jaguar could not satisfy demand for its saloons, perhaps there was room in the market place for the P8? Certainly many customers would not wait for their XJ and ordered a German car instead.
Thus, the Range Rover was moved upmarket and it was decided to create a cheaper 4×4 from Range Rover underpinnings, which became the Discovery, launched in 1989. Sadly, by this time, Tony Gilroy had left Land Rover after a managerial disagreement. Fears that a cheaper model would impact on Range Rover sales were unfounded. In 1990, Land Rover produced 68,471 vehicles, now 14.42 per cent of Rover Group production. It was a gradual process that, by and large, passed unnoticed by the media, but, bit by bit, sale by sale, Solihull was clawing back the ground lost during the British Leyland era.
In 1968, the year of the BLMC formation, Solihull produced 44,928 Land Rovers, 1779 Rover P5Bs, 33,106 Rover P6s for a total of 79,813.
Popularisation of the Rover marque
Meanwhile, over at Rover Cars, the car company formerly known as Austin-Morris, the latest collaboration with Honda was announced as the second-generation Rover 200, codenamed R8 (above). The first-generation 200 had been a surprise hit. It had not been the most exciting looking car in the world, but its combination of Japanese build quality mated to superior equipment levels, had appealed to retirees and people who wanted to downsize to something smaller and more economical. The SD3, as it was known, could be likened to the upmarket, badge-engineered versions of the ADO16 1100/1300 series, a 1980s version of the Riley, Wolseley or Vanden Plas ADO16s, a badge-engineered Honda.
It seemed as if Rover has stumbled across its equivalent of the Volkswagen Golf. The original 200 might not have been looked on as a true Rover by enthusiasts, but it was better built than any SD1.
The R8 expanded on this theme. The new Rover was available in a multiplicity of variants as the new slick, market-savvy Rover exploited every sales opportunity. All the petrol engines came with 16 valves and fuel injection, including the new 1.1- and 1.4-litre K-Series. Just as the Rover P6 resembled in packaging terms, an upgraded Ford Cortina, the R8 looked like a superior version of the best selling Escort Mk3/4. The R8 was an immediate hit, and what’s more, was built with the desired quality right from the start.
Some 950,000 were built between 1989 and 1998, with production peaking in 1994 at 191,114, when its R3 replacement was on the horizon. And Rover was able to get away with selling it at a premium price over its Ford and GM rivals.
Rover’s 1990s renaissance
It was the success of the R8 that has encouraged many enthusiasts to believe that Rover Cars, with a bit more intelligent management, could have become a sustainable success story. Behind the façade of the R8’s success, Rover had become dependent on Honda in order to develop cars cheaply. Honda, though, was no longer willing to play ball and imposed restrictions, resulting in limitations to design freedom in transforming Honda designs into upmarket Rovers. The forthcoming Rover 600 and HHR/400 were subject to these restrictions.
Honda was also in the process of establishing a European manufacturing base at Swindon, and the need for a link up with Rover in order to gain access to the large European car market was superfluous. Rover needed a new design partner fast.
The other problem for Rover was that the R8’s 16-valve technology was easily and quickly copied by the opposition. It had taken rival firms years, if not over a decade, to come up with their competitors to the BMC Mini and ADO16. However, in the case of the R8’s rivals, existing models could be easily modified to take 16-valve engines, and negate Rover’s technical lead.
Also the R8’s success came at a time of world recession. Bad timing meant that Rover was unable to reap the true benefit of its innovation.
Lost opportunities under British Aerospace
It was during British Aerospace’s ownership of the Rover Group that the last real opportunity to build a properly-funded new executive Rover without restrictions, to rival the German makes, existed. However, the decision was taken to facelift the existing Rover 800 under the project name R17, which was announced in 1991 and never sold in anything like its previous quantities.
A glance at the production figures suggests that British Aerospace’s parsimony was not without reason. Once the newer, and very stylish Honda-based Rover 600 went on sale in 1993, 800 sales appear to have migrated to the newer model. With petrol, diesel and a near 200bhp performance version, the Rover 600 was a more than competent car.
However, BAe did sanction the development of the second-generation Range Rover, the P38A, perhaps sensing that there was more profit in that.
Building more SUVs
Also Land Rover persuaded the Rover Group management that the way forward was to develop a new smaller 4×4 employing the Longbridge built K-Series engine and a diesel unit. This became the Freelander – in a sense, this was the real successor to the Rover 800, but because they came from different divisions of the same organisation, nobody sees it that way.
If the 1980s had been the triumph of the hatchback, the 1990s saw a gradual shift away from traditional cars towards SUV/MPV/4×4 type vehicles. Unitary construction had ushered in an era of low slung vehicles, of which the Issigonis Mini was the most extreme but, by the 1990s, more and more people were no longer prepared to bend down in order to get into a car shod with 13 or 14in wheels.
SUV/MPV/4×4 type vehicles offered space that saloon cars, encumbered by more and more safety regulations, could not match. Ever-improving diesel engine technology also meant that these vehicles did not necessarily need to be expensive to run and sound like a 1970s Royal Mail Commer van. Land Rover was poised to exploit this change in consumer buying habits, Rover Cars was not.
Great takeover: the arrival of BMW
In 1994, the year British Aerospace sold the Rover Group to BMW, Rover produced 478,866 cars. Of this total, 94,716 were Land Rovers, 19.78 per cent of the total. Solihull was now producing more vehicles than in 1968 when the Rover brand was at its zenith. There might have been question marks about build quality and productivity, but something was clearly going right. Whether they liked it or not, Rover now had a new design partner in the shape of BMW, but was it the right partner?
The name Rover conjures up images of executive cars. The name BMW also conjures up images of executive cars…
That was a marriage which was never going to work. There was model overlap in several places which were crucial to Rover’s revenue stream. The most obvious was in the top of the range Rover 600 and 800. BMW was certainly not going to fund a direct 3 and 5 Series rival for these cars.
Exciting sporting development
Also in the pipeline was the MGF sports car, announced in 1995. MG had withdrawn somewhat acrimoniously from the large American market in 1980. An owner with deep pockets could have settled any outstanding legal disputes and re-introduced MG into the US market.
In 1986, when Ford tried to buy Austin Rover, it had a 25 per cent share in Mazda, which was developing the MX-5. Had Ford gained ownership of the MG brand, they would have exploited it. However, in 1995, the MG moniker was owned by BMW and they had the Z Series of sports cars. So the MG brand was untapped outside Europe, and sadly remains unexploited to this day. The heyday of MG sports cars in the USA is now but a distant memory.
Another problem was Honda, which, having declined to buy Rover outright, demanded royalty payments for the models they had helped to design. This meant that, until BMW-funded designs came on stream, Rover Cars had little chance of being profitable. This scenario did not apply to Land Rover.
New model army – innovation and disappointment
In 1995 Rover announced the R3, the third-generation 200, based on a shortened R8 floorpan, and the new HHR/400, which was based on the contemporary Honda Civic. Honda engines were now out, and were replaced by enlarged K-Series engines of 1.6 and 1.8-litres. Although the R3/200 was officially the first all-British Rover/BL car since the Montego of 1984, presumably because it used a shortened R8 floorpan, it still incurred royalty payments to Honda.
The conventional view is that the HHR/400 was an overpriced failure, that the brand loyalty built up by the R8 evaporated and customers returned to the likes of Ford and Vauxhall with their new 16-valve engines. The figures show that, in its best year of 1996, 123,514 HHR 400s left Longbridge, and on face value the car seemed to have failed in comparison with its R8 forebear.
What complicates the picture is that Rover replaced the R8 with both the HHR/400 and the R3 200. In 1996, Rover produced 108,913 R3s, a combined total of 232,427. In 1997, the HHR 400 declined to 119,455, whilst R3 production soared to 144,096, a combined total of 263,551. Total Rover cars production for 1997 was 381,206, the best since 1990.
The picture was also complicated by the fact that both the Maestro and Montego had ceased production in 1994.
BMW vs Rover: Investment in the UK
BMW invested £600 million in Rover in 1997, but it appears that the dependence on Honda, which had enabled Austin Morris/Rover to survive the 1980s, was now coming back to haunt them. As well as royalty payments to Honda, the enlarged K-Series engines, which were intended to end dependence on the Japanese firm for power units, were now experiencing serious head gasket issues.
All this had to be fixed under warranty, at great expense, and it might be added, inconvenience to the customer.
Although BMW/Rover tried to keep a lid on things, word gradually got around that the K-Series engine was less than reliable at a time when Ford was upping its game with the Mondeo and Focus. The Land Rover Freelander went on sale in 1997. Initially available with a 1.8-litre K-Series and a 2-litre L-Series diesel, the new addition to Solihull’s portfolio was another hit. Also in the pipeline was a 2.5-litre KV6-engined variant.
Long-term solution for short-term fix
It appears BMW’s policy was to weather the storm, and the losses, until a properly-funded and developed new range of Rover cars hit the showrooms. The same applied to the head gasket failure issues with the K-Series. It appears BMW’s attitude was to effect repairs under warranty and ultimately resolve the problem by replacing the K-Series with new engines that would be built at a new factory at Hams Hall, Birmingham.
The most publicised of the planned new cars was a brand new Mini to replace the Issigonis classic. In late 1990s Britain, dubbed ‘cool Britannia’ by the intelligentsia, where Brit Pop was the music of the moment, the Gallagher brothers were seen as spokesmen for their generation and Tony Blair was in Downing Street, the 1960s were seen through rose-tinted spectacles. The Mini suddenly became fashionable again as it approached its 40th birthday.
BMW harnessed the zeitgeist and pressed ahead with developing its 21st century take on an automotive icon. Rover’s own take on a new Mini focused on its economy car virtues. BMW focussed on a more sporting, fun-to-drive vehicle that would retail at a premium price. BMW’s idea won through.
The MINI adventure was packed full of surprises
The biggest surprise about the new Mini, codenamed R50, was the decision by BMW not to use the Rover K-Series engine, but a Chrysler unit made in Brazil. To conspiracy theorists this is proof that BMW intended to asset strip Rover, and the decision has never been satisfactorily explained. It is said that Ford tried to buy Austin Rover in 1986 in order to get hold of the K-Series engine.
Now in the late 1990s BMW seemed to be rejecting the unit. In 1997, a new Mini R50 concept car was unveiled by no less than John Cooper. The Frank Stephenson design looked like a bloated pastiche of the BMC original. However, as history records, BMW got everything right with what became its new MINI.
The new MINI was intended to replace both the Rover 200/R3 and the Rover 100/Metro and would be built at Longbridge. Unfortunately, though, the 100/Metro had to be pulled from production in December 1997 when the model’s failure in crash tests became widespread public knowledge. Orders dried up and production was halted. From Rover’s point of view it was a disaster as the 100/Metro had no Honda DNA, and therefore there were no royalties to pay. At a stroke some 40,000 cars were knocked off Longbridge’s annual production and there was nothing to fill the void.
Customers melting away
Many customers probably defected to the Sunderland-built Nissan Micra K11, an attractive small car design, which seemed to have already made serious inroads into traditional Metro/100 territory. As recently as 1994 Longbridge had produced 81,782 Metros. It could also be argued that the Micra K11 had classic Mini styling cues and demonstrated that it was possible to build a small car without resort to the inflated extremes of BMW’s R50.
The HHR/400 would be replaced by Project R30, which, it was proposed, would be built at Cowley, possibly as the Rover 55. The car would use a new generation of engines built at Hams Hall, again suggesting that the K-Series was superfluous to BMW. Also in the pipeline was a third-generation Range Rover, codenamed L30 by BMW. Bizarrely, the Range Rover Design Team was shipped over to Munich and told to design the vehicle they always wanted to. According to Mike Gould, there was a lot of BMW X3 and X5 in the resulting vehicle.
The only BMW-financed Rover car to reach production before the men from Munich walked away was Project R40, the Rover 75.
Rover’s last chance saloon
The Rover 75 was intended to replace the Honda-based 600 and 800 models, but was the model really needed at all? In 1998, Land Rover produced 60,654 Freelanders, and that was just the beginning. These were mainly conquest sales. Surely the Freelander could do everything the 75 could do without threatening BMW 3 and 5 Series sales?
The Rover 75 was designed with no cost constraints on components to be a quality car. But restrictions were placed on its intended market slot and its styling was controversial to say the least. The intention was to slot the Rover 75 just below the BMW 3 and 5 Series – in marketing parlance, it was meant to be in the lower D-segment.
The resulting car had a cramped passenger cabin, which no matter how fine the engineering, was not going to attract the family man and dog owner. On top of this the car had retro styling that made it look as if it should be in the nearest classic car show.
Rover 75: Marmite styling
Styling is subjective, and, in its own way, the Rover 75 was a fantastic looking car, but for the model that really was Rover’s last chance saloon, it was a grave misjudgment. Just as the contemporary Jaguar S-Type was an American car executive’s view of a traditional British car, so the Rover 75 was a German car executive’s view of a traditional British car.
The Rover 75’s styling cues were taken from the P4 and P5 cars, which were not big sellers when they were current. Apart from the front seat design, there was no acknowledgement to the car that really put Rover on the map, the P6. For the kind of owner who could afford a Rover 75, the P6 would have been the Rover of their teenage memories, not the staid P4 and P5. Car manufacturers are always banging on about attracting younger buyers but, if a company deliberately set about designing a car for more senior motorists, it would be hard to top the Rover 75.
And, if retro styling was such a good idea, why didn’t BMW apply the same principles to its own Chris Bangle-designed cars?
BMW vs Rover: the end is in sight
It was during 1998 that the wheels began to come off BMW’s plan to regenerate Rover. The increasing strength of sterling began to affect Rover. Exports were now more expensive and imports, which included many Ford and GM cars, were now cheaper. BMW executives began to speak publicly about the problems affecting the Rover when announcing cuts in production. Another beneficiary of the strength of sterling was BMW themselves, as Britain sucked in more 3 and 5 Series, though they kept quiet about it.
BMW decided to bring forward the announcement of the Rover 75 to the Birmingham NEC Motor Show in October 1998 as a spoiler to Ford’s planned announcement of its equally retro-styled Jaguar S-Type. Only four weeks before, BMW Chairman, Bernd Pischetsrieder, had frozen investment in the Rover R30 and R50 Mini projects, as the pressure from BMW shareholders to abandon the Rover project mounted.
His speech at the Rover 75 launch was to cause shockwaves: ‘Short-term actions are required for the long-term future of the Rover Group. Talks are taking place with the British Government about the whole problem.’
The NEC debacle
Bernd Pischetsrieder told his audience that Longbridge was unviable unless drastic cost-cutting occurred, thousands of workers made redundant and more flexible working practices introduced. Otherwise it would close. He went on: ‘Only if those three elements – cost cuts, productivity improvements and Government aid – were in place, would the Mini and R30 proceed.’
During 1999 BMW’s problems with Rover were fully aired in the media. BMW demanded a £200 million aid package from the New Labour Government, pointing out that the previous Conservative Government had given £125 million to Nissan in 1986 and, more recently, some £72 million to Ford for the Jaguar plant at Castle Bromwich.
BMW successfully persuaded the Rover unions to agree to more flexible working practices but, in February, BMW Chairman Bernd Pischetsrieder resigned to be succeeded by Joachim Milberg. Lorenz and Brady wrote: ‘Up to 100 BMW engineers were, by that stage, playing key roles inside Rover. Many were working at Oxford to repair the quality problems that had already put the new Rover 75 executive model eight weeks behind schedule for its planned March launch.’
A slow start
The inference from this statement was that Rover was incompetent and incapable of doing the job themselves. The increasing transfusion of BMW staff into Rover was also a sign of the Munich management’s control freak approach to running its British subsidiary.
Volume production began on 29 April 1999 and the Rover 75 finally went on sale in the UK in June. BMW/Rover boasted that, by July, Cowley production would be 1660 cars per week graduating to 2800 per week by the end of the year. It was expected that export sales would take around 70 per cent of production. Hence, if we assume the Cowley plant worked a 50 week year, then total annual production of the Rover 75 would be 83,000 rising to 140,000 cars a year! These were levels way above anything seen for a British-built executive car.
In writing this article, one is struck by a sense of déjà vu. The common scenario is thus: Austin Morris is taken over by another company that believes that the staff at Longbridge and Cowley are, by and large, inept. The new owners convince the media that they are infallible and use their coffers to fund a new range of models. One of the new crucial models has completely unsuitable styling for its task in hand and ludicrous sales projections. It bombs…
An unequal failure
Three decades earlier it was Lord Stokes, Leyland and the Allegro. Now history was repeating itself. In 1999, Cowley produced 53,581 Rover 75s, followed by a further 28,388 in 2000, neither total being for a full calendar year, but it comes to a grand total of 81,969.
Much of the blame for the relative failure of the Rover 75 has been attributed to BMW’s washing of its dirty linen in public. In expectation of a Government aid package, the new BMW management had decided to press ahead with the R30 and R50 projects. However, the Government decided to downgrade the aid from £200 million to £118 million over five years. This had infuriated BMW, which had invested £2.5 billion in five years of Rover ownership, and had plans to invest a further £1.5 billion over the next three years.
This was considerably more than the British state had spent on British Leyland/Rover from 1975 to 1988. Most of this had been squandered, subsidising strikes, while investment in new plant and machinery had been wasted thanks to poor quality control, which meant that sales targets were unattainable.
The New Labour Government was very astute in avoiding the mistakes of its predecessors, a policy that would sustain them in power for thirteen years. One of these perceived mistakes was the provision of state funds for lame duck industries. However, the situation confronting the Government in 1999 was very different from that of, say, 1977. The unions were not part of the problem, they were part of the solution.
Tony Woodley of the Transport and General Workers Union was one of the heroes in the effort to keep Longbridge in business but the New Labour Government was obsessed with its public relations image, and this influenced its decision-making process. To the ordinary person in the street, Rover was in trouble because they made lousy cars. Ford, Peugeot and Vauxhall were okay because they made good cars. What Joe Public did not comprehend, though, was that, in times of strong currency fluctuations, the big boys simply imported more cars into Britain instead of building them at their UK plants.
In 1999, the mindset was that British cars, apart from the classic Mini, were decidedly uncool. This was a hangover from the British Leyland era, though it was probably a decade since a badly-built car had left a Rover car plant. The irony was the one car Rover could not build to modern quality standards was the classic Mini, and its antique build methods pushed down the Longbridge productivity figures. Its reliability was also well down the league of new cars on sale in 1999.
A less-than-impressive performance
Eventually, the Government upgraded its offer to BMW to £150 million, but this only happened after more negative exposure in the media. A consequence of all these shenanigans, carried out in the media spotlight, was that Rover sales collapsed during 1999 and the company haemorrhaged cash. The R3/200 was rebranded as the Rover 25 and the HHR/400 became the Rover 45 to bring them into line with the new Rover 75.
In 1999, the Rover Group built 395,307 cars. This was broken down into a mere 215,493 from Rover Cars and 169,426 for Land Rover as Solihull continued to surge ahead. Land Rover alone built 70,266 Freelanders, considerably more than the Rover 75. As for the Rover 75, the applause for the car was unanimous, the best ever car to adorn the Rover badge, some say. But who was actually going to buy one?
Again there is a sense of déjà vu with the Rover 75. We had been here before. Like the Rover 75, the BMC 1800 Landcrab, had been praised to the hilt and won a host of awards on its debut in 1964, yet it spectacularly missed its sales targets. Ironically, they each ended up being built at both Cowley and Longbridge.
Slow production build up
In 1998, Rover had built a combined total of 46,794 of the outgoing 600 and 800 models. The 1999 production total of 53,581 Rover 75s was little improvement, but actually good by British standards, if not to BMW’s expectations. The best year for the Triumph 2000/2500 had been 1970 when Canley built 32,074 examples. Records are incomplete, but the best year for the Rover P6 appears to be 1967 when Solihull churned out 34,899 cars, all of them would have been of the 2000 model.
The best year for the Rover SD1 was 1978 when Solihull built 54,462 examples of what was then Britain’s most-wanted car. The Rover 800’s best year was 1987 when 54,434 left Cowley. The Rover 600 wins the prize though, with 61,413 being produced in 1995. The 600 would have probably sold even more, but as it was heavily based on a Honda design, BMW we reluctant to promote it. It was in the design stage of the Rover 600 that the retro design theme had been first mooted, but the 600 was more subtle in its approach than the 75 in its balance between retro and modern.
After the Government had agreed to a £150 million aid package, things seemed to go quiet on the Rover front. The cavalry, in the form of the R50 MINI was on the horizon and BMW just had to bide their time until it reached the showrooms. Then into the picture came Alchemy Partners, founded by Eric Waters and Jon Moulton, who opened a dialogue with BMW in October 1999.
Alchemy’s motives may have been entirely genuine, but they implanted into BMW’s corporate head the notion that they could walk away from Rover. It dawned on them that, with the X3 and X5 in the BMW stable, Land Rover was superfluous and could be easily sold on. With overcapacity in the European car market, there was no real hope of selling Rover Cars to a major player, so thoughts then turned moving the R50 Mini into the smaller Cowley plant and selling Longbridge to Alchemy Partners, with their ideas for MG, a brand BMW had no interest in promoting.
BMW pulls out to leave Rover floundering
It was in March 2000 that the Schweppes hit the fan, when BMW’s plans to extract itself from the Rover morass hit the headlines. The rest of the story is well known. Alchemy’s sports car plans for Longbridge involved redundancies, which met with all-round hostility. Having broached the idea that BMW could walk away from Rover, the talks between Alchemy Partners ultimately collapsed.
Then Phoenix Venture Holdings arrived onto the scene, fronted by former Rover boss John Towers. Seemingly with the support of the entire nation, they were hailed as heroes as they came to the rescue, and the Government brokered a deal to save Longbridge.
Lifelines for MINI and Land Rover
BMW then managed to offload Land Rover to Ford for £1.8 billion, which somewhat compensated for their huge investment in the Rover Group. This was beneficial to Land Rover as it gave them access to the Ford parts bin in its search for a replacement engine for its venerable V8, and Jaguar had just what they wanted. The irony was that the Jaguar XJ40 had allegedly originally been designed to be incapable of taking the Rover V8! Ford found out that the buildings at Solihull were in a poor state of repair even after six years of BMW ownership.
Phoenix Venture Holdings used Longbridge as the base for the newly renamed MG Rover Group but soon found out that the patriotic public support they had received did not translate into new car sales. MG Rover’s collapse in April 2005 was inevitable, but that is another story.
BMW moved R50 production, now called the MINI into the Cowley plant. While staff awaited the production facilities to arrive from Longbridge, they ganged together to help re-paint the buildings. Again, why did the factory need re-painting after six years of BMW ownership? The new MINI was launched in 2001 and has proved to be an enormous success, guaranteeing job security for thousands of people.
Who, then, were the heroes and villains in this story and was Rover a sustainable brand?
As related earlier, the standard work on the subject is End Of The Road by Chris Brady and Andrew Lorenz, which is a bit like a latter-day Leyland Papers, the 1971 book by Graham Turner on the formation of British Leyland. Again more déjà vu! Both books describe the takeover of Longbridge and Cowley by an outsider that arrogantly thinks it knows better, and both books are reluctant to acknowledge that the new owners were fallible.
The heroes are Tony Woodley of the TGWU, who valiantly fought for Longbridge and helped banish the 1970s images of ‘Red Robbo,’ Tony Gilroy for his vision in expanding the Land Rover brand that continues to bring great success and Sir Graham Day who managed to stop the rot at British Leyland/Rover, and create a base for others to build on. What about the villains, then? Well, let’s examine the role of the parties involved in the collapse of the Rover Group in 2000.
There will always be those that blame the Thatcher Government for the ultimate demise of Longbridge for selling the Rover Group to British Aerospace in 1988. To these people Rover was a national asset and was sold off for a song. That’s an entirely valid point of view.
However, the Austin Rover era, when lack of quality control had squandered the states investment, had completely destroyed the business case for continuing to prop up British Leyland.
Regretfully, Austin Rover only had itself to blame for this fiasco. Back in 1986, it seemed only a matter of time before Longbridge and Cowley were shut down, therefore getting British Leyland/Rover off its hands was a Government priority. No one expected Graham Day and his team to perform a minor miracle and stop the rot, by making sure the cars were assembled properly and subjected to effective quality control. Since 1975, the Government had seen, and highly paid, a succession of top-notch executives who had failed to deliver at British Leyland. Even the much vaunted Sir Michael Edwardes, who had successfully confronted the powerful British Leyland Combined Shop Stewards’ Committee, failed to deal with the endemic quality issues plaguing the company and stop the slide in market share.
Thus, offloading Rover to a third party was seen as a way of taking its problem child off its hands and removed the prospect of making what seemed an inevitable decision to pull the plug on the company. The political bonus was that British Aerospace was a British company.
At the time of the sale comparison was made with Saab, a company that also made both cars and aircraft. Like Rover, Saab cars would also be bought out by a larger motor manufacturer, in this case General Motors, again with talk of boosting the brand, and that also ended in tears.
Some people also criticise the Blair Government for not stumping up the full £200 million BMW demanded in aid in 1999, instead offering £150 million. However, whether this would have persuaded BMW to stick with Rover is open to debate.
British Aerospace are often criticised of underinvesting in Rover, and the company was certainly guilty of asset stripping through its property company, Arlington Securities.
However, it is easy to make judgements when it is not your own money at stake. The main criticism of British Aerospace is that, instead of developing an all-new model to replace the Rover 800, it took the cheap way out and funded a facelift of the car known as the R17, which appeared in 1991, but never sold as well. But it seems as if British Aerospace made the right choice after all. The R17 800 model tided Rover over until the 600 came on sale in 1993, and the real investment went into the Land Rover Freelander, which was an addition to the Rover Group’s model portfolio and sold in quantities that no large Rover saloon could match.
Where British Aerospace were culpable was in its choice of buyer for Rover. BMW, as a major motor manufacturer, was bound to antagonise Honda. The ideal owner for Rover was a company with little or no motor manufacturing interests, who could keep Honda on board.
Honda is neither a hero or a villain in this story. The Japanese company had enabled Austin Morris/Rover Cars to survive the 1980s. However, its refusal to buy Rover outright meant the future of the brand was always problematical.
While it lasted, the collaboration between Rover and Honda produced some genuinely nice cars, with perhaps the Rover 600 being the best of the bunch. The concept of a Rover as an upmarket car with Honda underpinnings was a profitable venture in the early 1990s, particularly in Europe. Rover’s success in exporting to Europe at a time of recession attracted the attention of BMW.
However, after the BMW takeover, Honda demanded and got royalty payments for all the cars they had had a hand in developing and this destroyed Rover’s profitability.
Rover had amortised development costs through co-operation with Honda. This meant it could make a profit on relatively low volumes. BMW found that, because of royalty payments to Honda, it could not make a profit on the Rover range it inherited. Salvation appeared to lie in the next generation of BMW-funded Rovers, the R50 Mini, the R30 and the 75 but, because these new platforms were unique to Rover, then a relatively small manufacturer, the new models would require huge volume to make them viable and, saddled with retro styling, this was never going to work.
Honda had saved Rover in the 1980s, but in the 1990s they held the key to its long-term survival. A full-blown takeover of Rover by Honda was probably the only realistic way that the British firm was going to survive, a solution many must have hoped for, but it was not to be.
While the whole Rover/BMW saga was playing out, Land Rover got on with the job of developing the best offroad vehicles in the world. This was an area that even BMW could not pretend that they knew better. If any brand has consistently got things right over the last quarter of a century, it is Land Rover, as they have been able to exploit the drift away from traditional saloon cars.
It was Tony Gilroy who started the push to expand the brand’s appeal, but perhaps credit should be given to the father of the original Range Rover, the late Spen King. While the glory days of Cowley and Longbridge had been back in the days of Beatlemania, mods and rockers and miniskirts, in 2000 the good times for Solihull were only just beginning. Why buy a car when you can buy a Land Rover?
The German carmaker would like us to think of them as heroes for investing billions into Rover and trying to change an ingrained culture that dated back to the BMC era. However, in researching this article, I have gained the impression that BMW ultimately bottled it. Those on the left of the political spectrum like to berate shareholders for having short-term interests, of not being able to see beyond the next dividend. In this case BMW bowed to pressure from shareholders to ditch Rover.
How many of these shareholders actually knew BMW was having to make royalty payments to Honda? As events panned out, both Land Rover and the new MINI became very successful. Demand is outstripping the ability of both Cowley and Solihull to supply the market, and both brands now have production facilities elsewhere.
Had BMW retained Rover, the huge Longbridge complex that analysts claimed was too big to be viable, would have provided the capacity that was needed. Remember that the R50 MINI was originally going to be produced at Longbridge. How much has BMW invested in order to produce the latest MINI in the Netherlands and Austria, in order to supplement Cowley production when Longbridge had all the capacity BMW needed? Back in 1964/65 Longbridge produced 376,781 vehicles.
BMW expected too much, too soon from its Rover subsidiary. It appears it was taken by surprise by Honda’s demand for royalty payments, which completely scuppered any hope of a profit on the interim, Honda-based cars. BMW also come across as arrogant. It seemed to think that its very ownership of Rover would have a halo effect, that BMW brand values were all conquering, that buyers would flock to Rover dealerships and sales would take off.
When this didn’t happen, BMW began to micro-manage Rover by sending more and more personnel over from Munich to get a grip on its ‘English Patient’. 1997 was the Rover Group’s best ever year, when it produced 522,566 vehicles, but BMW was not satisfied.
Had BMW held on until 2002, it might have seen the green shoots of recovery as the R50 MINI reached the showrooms. The problem with all this pontificating is that, although we know the R50 MINI and Land Rover went on to success, they were not the only models BMW planned for Rover, and their vision of what a Rover saloon should be was not so promising.
The Rover 75, and no doubt the R30 as well, relied too much on retro styling. Parallel to this was the retro styling imposed by Ford on Jaguar. Both the S-Type and the X-Type failed to meet their sales targets, despite the copious quantities of cash injected into Jaguar by Ford.
Once the design shackles were removed, and Jaguar was allowed to design the car they wanted to, the XF, sales took off. What this served to prove was that retro styling deterred buyers. The notable exceptions to this rule being the BMW MINI and the new Fiat 500. BMW blamed the strength of sterling for its Rover debacle, but the company’s real mistake was to discuss its problems in the full glare of the media spotlight.
Bernd Pischetsrieder’s speech at the Rover 75 launch in October 1998 and the ensuing attempt to get Government aid sent Rover sales into freefall. Again, BMW expected too much, too soon of Rover. The more money BMW injected, the more cars Rover had to sell to be viable, and the opposition was not going to simply roll over and give up market share as BMW seemed to expect.
It had taken decades to build up the BMW brand, but the men from Munich expected miracles from Rover and their interim, Honda-based cars. When these miracles did not happen, Rover got the blame and BMW walked away. The scenario with Rover was also played out with Ford and Jaguar and General Motors and Saab. With all the management speak of growing the brand, nobody questioned who was going to buy all these extra premium-priced cars.
The Rover brand certainly was not dead in 1994, but it was by the time BMW had finished with it.
The headgasket issues with the K-Series engine was the only real blot on Rover’s conduct during this period. The failure to deal with the issue promptly, and the fact that many owners had tortuous dealings in seeking both rectification and recompense, only helped to tarnish the Rover brand in the eyes of consumers.
Rover’s employees were hapless bystanders as the drama unfolded. They had left the days of Red Robbo and mass meetings in Cofton Park long behind them, and did all that was asked of them by their masters. They have had to put up with the inference by analysts that Rover failed because its employees and methods were not fit for purpose. This is palpably untrue.
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