(27-06-2012 11:30am)cutter7 Wrote:  BMW = Hideous things & after what they did to Rover Group they can get stuffed.


Why did BMW buy Rover?

This is a very interesting, for a company with the prestige of BMW to have purchased a car company and then dumped Rover after such a short time, questions must be raised as to why exactly did they buy the company in the first place, and did they ever really intend to keep it?

BMW had a highly developed and nurtured image. However, they also had a very limited market into which they sold cars. BMW had been described as a company that 'made only one saloon, but in three different sizes'. Although their market was expanding, global consolidation of the motor industry threatened either their independence or their ability to continue to make cars competitively, depending on how you viewed it.

BMW therefore needed to expand their market, and thus their product base. However, to do this threatened to destroy their carefully nurtured image. If they were to develop a cheaper range of cars to compete with VW, Ford, Fiat and other mass market players, surely this would devalue the BMW brand. Other companies had already seen it become increasingly difficult to have a brand stretched between the extremes of a small budget car and a large luxury car. Ford failed to achieve a quality reputation with their Scorpio when they also produced the Fiesta. Fiat's Croma was a dismal market failure, whereas their small cars like the Uno were market successes that sold extremely well. Where companies have had successes in both of these market areas, they have achieved this with multiple brands, such as the VW Group's use of Skoda at the lower end of the market, going through Seat and VW up to Audi at the premium end of the marketplace - as well as owning exclusive brands like Bentley. Ford now have multiple brands as part of their 'Premier Automotive Group' (Jaguar, Lincoln, Aston Martin, Volvo and Land Rover) and have all-but abandoned the high end of the market under the Ford badge.

The options that faced BMW were to either buy an existing brand (or brands), or to build a new brand from scratch. The latter option, the route taken by the Japanese with Toyota creating Lexus, Honda creating Acura for the American market and Nissan creating Infiniti, also for the North Americans, was initially the route that BMW appeared to be taking. Spy shots and leaked information showed that BMW were at least investigating, if not actually developing for production, front-wheel-drive technology. Front-wheel-drive is something that would never appear in a BMW-badged car, as rear-wheel-drive is a core value of the brand. However, this is not the route that BMW eventually took.

The opportunity arose to look at Rover when BMW were to supply diesel engines to the Rover Group for the new Range Rover. The Rover Group had recently had a huge upswing in sales to continental Europe when the market there was contracting, Rover being the only company to actually grow their sales at that time. Furthermore, their sales were actually on course to overtake BMW's.

When BMW looked at Rover, they were impressed. Their opinion was that in terms of quality, Rover were as good as, if not in some cases better than, BMW. Rover appeared to fit perfectly with BMW. There was very little in the way of overlap. Rover cars would be able to fit below BMW in the line-up. Land Rover did not compete with BMW at all, and yet had a luxury image that complemented BMW's perfectly, and an under-developed, 'latent' brand of Mini (Bernd Pischetsrieder, BMW's chairman was the nephew of Sir Alec Issigonis, the Mini's designer). However, best of all, there was a cupboard-full of heritage that BMW could exploit (MG, Riley, Austin-Healey, Triumph, etc) - and to an Anglophile like Pischetsrieder, this was manna from Heaven.

The deal to buy the Rover Group from British Aerospace was completed in a whirlwind 10 days. BAe were keen to dispose of Rover, as the company did not fit well with their core interests of Aerospace and defence. The high capital-consuming business of long-run, mass production of low-cost consumer products had little synergy with the low capital-consuming, build-to-order, niche production of high-value items such as Airbus wings or military jets. BAe were keen to sell, BMW wanted to buy.

Honda were the only problem. Honda, Rover's partner for over a decade, were deeply entwined with Rover's fortunes. Rover cars were not only heavily dependent on Honda for their engineering, but the company was 20% owned by Honda (the Rover Group owning the remaining 80%) and the Rover Group owned 20% of Honda's UK manufacturing facility in Swindon. Honda, however, were not interested in working with BMW. They did not want to retain their equity stake in a Rover now owned by a competitor and they wanted their 20% of Swindon back. The cross-holding was quickly unwound.

However, this background does not tell us exactly why BMW shelled out so much to purchase Rover. Did BMW buy to expand their portfolio and manufacturing base or to thwart their competitors? Although at the time, it was seen as the former, the latter objective cannot easily be dismissed as fantasy. If, as was believed at the time, Rover were on course, with their Honda-derived vehicles, to overtake BMW in terms of sales volume in Europe - and Rover were definitely trying to become "Britain's BMW" - was strangulation from inside the only way of stopping this threat? It was also the case that killing the Honda-Rover partnership would set back the European plans of Honda - another "quality competitor", as viewed by BMW.

Did BMW ever really mean to keep Rover?

Since Day One, BMW were very specific about where they spent money on investment. Those areas in which they invested were either kept after the sale of Rover (Cowley, Swindon, Hamms Hall etc) or sold for a big profit (Land Rover). The cars they were developing, but which were not launched, were retained. As was the Triumph marque. There will be massive capacity at Cowley for making these cars, as there will be at other BMW plants around the world.

The engine for the new Mini was never intended to be built by Rover. Very early on, it was decided that it would be made for BMW by Chrysler, in South America, so BMW was never going to be dependent on Rover facilities for making this vital part of the new Mini. At the time, the strange decision not to use the K-series engine was never explained or understood. In the light of later developments, a possible explanation becomes clear. It was also possible that BMW viewed Chrysler (prior to its takeover by Daimler-Benz) as a possible purchaser of the parts of Rover that it did not want to retain.

Under BMW, Rover's dealership base was drastically cut. There was very little in the way of new models coming out (The 400, 200 and MGF were already substantially developed when BMW purchased Rover. Only the Rover 75 was developed and launched under BMW, in a period of five years.) With this in mind, is it surprising that there was a sales decline - induced by BMW's management?

Rover was Honda's partner and also its foothold into the European marketplace. By killing that partnership overnight, Honda were set back in Europe by anything up to four years. Did BMW see Honda as a significant threat that had to be stopped?

It could be argued that BMW wanted a quick start in 4x4 to be able to compete with Mercedes-Benz. Once the X5 had been developed and launched (with Land Rover technology, know-how, etc for sure), BMW no longer needed Land Rover. It has been said that Land Rover was raped and pillaged by BMW and that without it BMW could not have produced the X5. It was also questionable at the time as to why BMW developed the X5 when they had the Land Rover brand in their portfolio. Looking back, it could be argued that they never intended to keep Land Rover, only to gain the knowledge that this world leader possessed.

The Rover 75 was launched - a car that competed with BMWs, remember - with the same high-tech diesel engine as the BMW 3 and 5 series. However, it was in a lower spec than that available to BMW customers. BMW launched this car and then tied one arm behind its back. They would not allow it to take sales from BMW.

When the Rover 75 was launched at the Motor Show, BMW executives stood up in front of the new car and said that they were thinking of closing down the Longbridge plant. As marketing initiatives go, this was a pretty bloody stupid one. It was no wonder that the car - What Car?'s car of the year - was a slow seller. However, despite how it might appear on the surface, BMW are not stupid. They are masters of the marketing machine. This can only have been a deliberate ploy to give BMW the ability to exit with the assets they had invested in.

Did BMW lose money on Rover?

Publicly, yes. Privately, probably not.

BMW did invest in Rover during it's ownership. However, the vast majority of that investment they either still own or sold at a fair value or a vast profit.

· They purchased the whole Group for £800,000,000, then sold Land Rover alone for £1,800,000,000. That is a £1bn increase on its own.

· The vast majority of the investment in plant went to Cowley (or Rover Oxford as BMW called it). BMW retained this plant.

· BMW invested in a new engine facility (Hamms Hall). BMW have retained this plant.

· BMW retained the Longbridge Engine & Transmissions facility, thereby forcing Rover to buy components from BMW to be able to make cars. The same goes for the Swindon panel pressing plant. BMW made money out of Rover car sales, even if Rover were making a loss. Eventually, they sold these facilities to Phoenix, but it was for a fair value, and not included in the £10...

(27-06-2012 07:08pm)Urban Splash Wrote:  I'm surprised with the number of people considering a 'performance' car and actually getting an Evoque. The Evoque is pretty bloody slow! Look at the x3 x35d. 0-60 in 5.8s, pretty awesome!