Hi, this appeared in my local paper. - Tony Drews
BMW: Economics forced it to give up Rover
FRANKFURT, Germany (AP) - German automaker BMW said today that a
fundamental shift in currency values was critical to its decision to
split from British-based Rover -- both dumping the money losing car
division and selling to Ford the profitable Land Rover off-road vehicle
line.
Speaking at a news conference in Munich, BMW chairman Joachim
Milberg confirmed that the company would sell Land Rover to Ford Motor
Co. in a $2.91 billion deal, the details of which are still to be worked
out. BMW will instead concentrate on its own X5 four-wheel drive.
"Selling Land Rover was not an easy (decision) but changes in market
conditions induced it," Milberg said. "Now we can concentrate on the
BMW brand."
Selling off Land Rover would free the Munich-based automaker to
focus on its strengths -- high-performance luxury cars, Milberg said.
The Land Rover deal comes just a day after BMW announced plans to
dump Rover's loss-making auto division, transferring it to Britain-based
investment group Alchemy Partners Ltd.
Milberg said BMW was forced into selling the units because the
strenghening British pound has made it more expensive to build Rover
vehicles in Britain and export them. He also cited British indecision
over adopting the euro, which is the common currency in 11 other
European nations.
"We have made every effort to reorganize Rover but considering the
fundamental change in conditions, we reached a limit in what we could
tolerate in terms of economic and business considerations," Milberg said
today. "We had to act now. We had to make a decision."
Milberg said the pound stood at just $1.24 when BMW took over Rover
in 1994, but has since appreciated to $1.56. A 12 percent rise in value
in the past year alone has boosted costs for BMW by $343 million, he
said.
The decision to shed the units drew anger of the British government,
which telephoned BMW headquarters in Munich to complain about being kept
in the dark about the negotiations, a spokesman for Prime Minister Tony
Blair said.
In London, Blair's spokesman rejected the pound's strength and
British intentions regarding the euro as legitimate reasons for ditching
Rover. "The government is not going to devalue artificially because
that route has led in the past to economic failure and boom and bust,"
the spokesman said.
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