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BMW’s Rover Purchase Reflects Taste for British Business

February 6, 1994

BERLIN (AP) _ BMW, synonomous with German industrial quality and craftmanship, is acquiring a British taste.

The automaker known for status cars made news this past week with the purchase of Britain’s Rover, the formerly state-owned maker of four-wheel drive vehicles.

Less publicized, however, is BMW’s other move into the British business world: a joint venture with Rolls-Royce - the jet engine maker, not the luxury car manufacturer.

That deal, signed in 1990, returned BMW to its original business of making airplane engines. BMW and Rolls-Royce PLC each are investing $570 million for a factory near Berlin to make jet engines.

Already they have orders totaling $850 million from Gulfstream of Savannah, Ga., and Bombardier Inc. of Montreal.

The BMW trademark, a circle with blue and white quadrants, represents an airplane propeller. It reflects what the Bayerische Motoren Werke made in 1916 under one of its founders, Gustav Otto, son of the developer of the four- stroke engine.

After World War I, the Munich-based company had to retreat to making only railroad brakes for several years because of treaty restrictions, and World War II left its auto and aircraft engine plants in ruins.

Despite the setbacks, BMW has clawed its way up the global auto industry with far-sighted management. The purchase of Rover cars roughly doubled BMW’s share of the European auto market, disrupting the Europe strategy of Japan’s Honda Motor Co.

Honda holds 20 percent of the Rover car-making subsidiary and, after 15 years of raising Rover quality, suddenly finds itself in an ungainly partnership with competitor BMW.

BMW, which is building a plant in Greer, S.C., to produce sporty two- seaters, is the only German carmaker to make money in 1993. It is paying British Aerospace PLC $1.2 billion for Rover from ample cash reserves.

The combination will intensify competition in Europe, said analyst Hans Hartmann of the research arm of Dresdner Bank, which is BMW’s house bank. ″Both BMW and Rover will want to export more intensively into the European market,″ he said.

BMW will be able to add the four-wheel-drive Range Rover to its extensive distribution network in the United States, where BMW posted a sales gain in 1993 that helped offset the dismal German market.

While the German auto industry overall registered a 23 percent fall in production to 3.75 million vehicles last year, BMW kept its production drop to 9.2 percent, making 534,000 autos worldwide.

Rivals Volkswagen and Mercedes-Benz had huge 1993 losses, but BMW, while not yet publishing a figure, said it was in the black. It hasn’t resorted to the staff cutbacks or shortened workweeks of its rivals.

How did BMW, which employs 71,000 workers, avoid having its business go sour like the others?

For one, the company wasn’t blinded by selling almost 600,000 cars in 1992, spokesman Uwe Mahla said. ″We always thought a figure 10 percent lower would be right, and that is what happened, so we were prepared on the production side,″ she said.

BMW says its attractive luxury cars and a flexible worldwide sales network helped it stay profitable. Rover also has a range of attractive models, from the little Mini to Rover sedans and Range Rovers. BMW, Mahla said, has no intention ″to make a BMW out of a Rover.″

Asked about Rover’s dormant classic models, Triumph and MG, he said the company would see if they could be given new life but cautioned against speculation there might be a Triumph roadster soon in the BMW-Rover line.

That prospect did not necessarily please Germans who have Anglophile taste in old cars.

Oliver Jourdant, layout editor of the German MG Drivers Club magazine, who drives a 1970 MGB, sounded like the British commentators who mourned the sale of the last big British-owned auto company.

″The British are so strong on tradition,″ he said. ″The sale is sad.″

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