BMW Rover etc

[Mike Wattam <MikeWattam@domain.elided>]

Hi Brian and All

Todays press cutting;

Shake-Up at BMW May Prompt Renewed Interest in Auto Maker

DETROIT -- The removal of two top executives at BMW A.G. on Friday will
prompt renewed interest by other auto makers in buying the German maker of
sporty coupes and sedans, but it remains unclear whether the controlling
Quandt family wants to sell, auto executives said over the weekend. 

Robert Eaton, a co-chairman of DaimlerChrysler A.G., said at an industry
conference in San Francisco on Friday night that the management shake-up in
Munich would cause a lot of activity with other automakers. "I figure by
Monday, there will be at least three or four companies bidding for BMW,"
Eaton said, adding, "That was not a normal management change that
occurred."  Eaton added that DaimlerChrysler would not be a bidder. Formed
by a merger last November of Daimler-Benz A.G. and the Chrysler Corp.,
DaimlerChrysler already owns Mercedes-Benz, BMW's main competitor, and is
negotiating to buy a stake in the Nissan Motor Co. 

BMW announced the resignation of its chairman, Bernd Pischetsrieder, and
its director of new-model development, Walter Reitzle, on Friday and said
it would also name new executives for marketing and production.
Pischetsrieder's ouster was attributed to BMW's money-losing purchase in
1994 of Britain's Rover, which makes cars and Land Rover sport utility
vehicles. Volkswagen A.G. and the Ford Motor Co. both let BMW know in
autumn that they were interested in buying the German automaker, executives
said in recent interviews. But BMW rejected both overtures without ever
entering into formal negotiations because the Quandt family refused to
consider a sale. 

Over the last 20 years, BMW has been periodically touted as a merger
candidate but has never lost its independence. The company was rescued from
the brink of collapse in 1960 by Herbert Quandt, a German entrepreneur. His
widow, Johanna Quandt, and two children, Stefan Quandt and Susanne Klatten,
have repeatedly refused to sell the 46 percent stake they still hold. They
reorganised their holdings last October to make any hostile bid more
difficult. Die Welt, a German newspaper, reported Sunday that a spokesman
for the Quandt family had rejected the possibility of a sale of BMW. Thomas
Gauly, the family's main spokesman, did not return calls to his office in
Germany on Sunday. Despite Rover's problems, BMW's attraction for other
automakers is clear, auto executives said in interviews earlier this year.
BMW has one of the strongest brand names in the global auto industry along
with top-notch engineers and highly skilled designers. 

Ford agreed on Jan. 28 to pay $6.5 billion for the car-making operations of
Sweden's Volvo A.B. But that still leaves Ford with more than $17 billion
in cash reserves, and its executives refused at the time of the Volvo deal
to rule out other acquisitions. Volkswagen has also been looking for deals.
Ford and Volkswagen officials declined to comment on BMW this weekend. 

Source: New York Times.

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Mike's comments;

It is now becoming more widely known that BMW have made some fundamental
and monumental blunders with Rover, which a first year marketing student
could have told them to avoid.  They have poured billions into the 4x4 Land
Rover ranges, yet have the Range Rover which is ageing badly and
registrations sinking as a result (a new model is on the stocks),
introduced a new Disco which looks almost exactly like the old one so is
going down like a lead balloon, and made the Freelander which because of 
the engine emissions and quirky styling cannot be sold in many markets. 
Oh, and now they are competing against Land Rover head-on with their new X5
4x4!!!!

Meanwhile at the Rover plants they have sanctioned the 75 which although a
beautiful car turns out to be a 'niche' product which will never sell in
big numbers, and a new Mini which looks like the old one, but inflated like
a balloon.  Where they should have been making their big effort is with the
mid-range cars where they should have secured a good volume, but instead
have over-priced them out of the market - the 200 is an excellent car but
has been badly criticised by a Rover-bashing UK press as 'too small'
whatever that means in a small car (!!) while the 400 - being based on a
Honda - is not a good car anyway.  The 600 which could have made them some
money, also was based on a dual Rover/Honda design, had never been
face-lifted - throwing away the whacky tacky Honda engines to use Rover
motors would have given a facelifted car much more acceptance and some more
years production/profitability.

Evidence points to them having no expertise at all in handling a volume car
maker.  They removed the best Rover staff who tried to tell them what the
correct strategy would have been.  They appear to have arrogantly assumed
that pouring money into the 'sexy' end of engineering would make everything
good at Rover.  No chance.  All they have learned from Rover is how to make
cars fast with zero body/trim defects, an of course how to lose money.

I predict that the profitability of the BMW marque will deteriorate over
the coming years due to ever-intensifying price and technical competition
and they will be forced to make cuts across the whole group - or be forced
into being taken over by a major player.  At their relatively small sales
volumes in relation to most other players it is difficult to imagine that
they will be able to finance technical innovation or the frequent model
changes, without having some kind of major alliance with other auto makers
to spread the cost.

They have now weakened their own balance sheet and exposed their problems
to the world, making them a prime target for take-over.  Again putting into
extreme doubt that Rover (cars) can survive.

I blame the politicians as usual.  They allowed BMW to walk in and buy
Rover Group 5 years ago, without a murmer.  I predicted (and so did others)
at the time that BMW did not have the wherewithall and it would lead to
tears in the UK.

Mike Wattam