BMW gave a shot in the arm to the motor industry yesterday by forecasting higher sales in 1999 and confirming it would invest #900m to enable Rover, its UK subsidiary, to develop new models to replace the 200 and 400 models.
The German luxury car maker said it had sold more than 700,000 BMW cars this year, against 675,000 in 1997, and would make higher profits on them.
Spokesman Richard Gaul said
it expected a further increase in 1999, despite a weaker market overall, helped by volume production of the new 3-series model.
Rover is making heavy losses - estimated at some #180m this year - and BMW is planning a major revamp for the business.
An agreement with the workforce calls for 2500 job losses along with more flexible working - to cut annual costs by #150m - and a #1.6bn investment programme.
Gaul said BMW would approve a timetable and a location for building the new models within the next four or five months. The company has dropped hints about looking at other countries, such as Hungary, for making the cars, but this is considered a negotiating ploy, given the #4bn invested in Rover.
BMW is hoping to pick up UK and European Union funding of some #200m for Rover's re-vamp.
The company has seen its share of the UK market fall to a record low of 6.6% and it is still dropping in a weak market. Renault has overtaken the brand to become the third largest in the market, boosted by newer models and heavy marketing spending.
The object is to bring productivity nearer the higher levels achieved by BMW in Bavaria. Rover can expect more hands-on management from BMW compared to what it has experienced in the past. Walter Hasselkus, the BMW executive put in to run Rover, had a lot of independence but he resigned at the beginning of the month, to be replaced by Werner Samann who is expected to pursue a tougher strategy to turn the business around.
However, the future of Longbridge would again be thrown into doubt should the continuing consolidation in the international motor industry continue. BMW shares have been strong this week on merger speculation, and have risen some 15% since Friday. While having a large share of the luxury end of the market, BMW is small relative to the industry giants.
Merger talk has been compounded by rumours of a rift at the top of the company, with chief executive Bernd Pischetsrieder and development chief Wolfgang Reitzle said to be at loggerheads. However, all the gossip was
dismissed by BMW yesterday. ''There are no plans or talks about a merger or an extensive co-operation,'' supervisory board chairman Eberhard von Kuenheim said. He added that the Quandt family, which holds a 49% stake in BMW, had no plans to sell its shares and was in no talks to sell its BMW holdings.
''Anyone who tells you there are talks by the major shareholders with anyone is lying,'' he said. Rumours have linked Ford's name with BMW and there was also speculation that BMW would link up with Volkswagen. Pischetsrieder last week ruled out co-operation with its German rival.
Reports of a power struggle between Pischetsrieder and Reitzle, stemming from Rover's troubles, were ''nonsense,'' von Kuenheim added. He said the chief executive had the support of the supervisory board and the Quandt family.
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