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BWM :) (archive)

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Posted by Eddy on February 17, 1999 at 15:08:02:

Munich, Feb. 15 (Bloomberg) -- Bayerische Motoren Werke AG may attract bids from some of the world's biggest automakers if its top shareholder, the Quandt family, signals that it's willing to sell its stake of Germany's No. 3 carmaker, analysts said.

Ford Motor Co., the world's No. 2 carmaker, is considering a bid that depends on the Quandt family being willing to sell, according to two people familiar with the Dearborn, Michigan-based company's plans. The Quandts and new Chief Executive Joachim Milberg continue to say BMW is not for sale. German newspaper Die Welt reported that No. 1 automaker General Motors Corp. may bid ``in the coming days,'' and Volkswagen AG is assembling cash and stock bid for a 24.9 percent stake, magazine Der Spiegel said. Officials at GM and Ford declined to comment, and VW could not be reached for comment. ``In the consolidation wave, everybody's afraid of being left behind,'' said David Healy, an auto analyst with Burnham Securities. ``BMW is the only attractive independent car producer that's left.'' Germany's Daimler-Benz AG acquired Chrysler Corp. for $36 billion in November. Ford agreed to buy the car-making operations of Sweden's Volvo AB for $6.45 billion last month. The moves exploits smaller rivals' successes, such as niche market dominance or production expertise, while costs fall through increased buying power and combined marketing, distribution, engineering and production.

Other carmakers covet BMW because, aside from its troubled U.K. unit, Rover, it produces luxury cars that generate substantial profits and have a valuable brand name. Its reputation for quality and technical excellence reinforces that image. The company had a stock market value of about $19.5 billion as of Friday. Talk about BMW escalated after the company replaced Chief Executive Bernd Pischetsrieder on Feb. 6 because of losses at its U.K. unit, Rover. Analysts said the shuffle signaled a change in at BMW that will lead to an aggressive attack on Rover's problems and possibly to a sale or alliance with another automaker.

That won't happen without the Quandts' consent. They own a 46 percent stake of BMW, worth an estimated $7.9 billion, according to Friday's closing share price. Last year, they moved their holdings into a private investment company to guard against such takeovers. The Quandts and new chief Milberg have remained steadfast that BMW can buck a global consolidation trend and remain independent. Milberg told Bavaria's prime minister that the speculation was strengthening BMW's desire to go it alone, Deutsche Presse Agentur reported. The talk ``was being planted'' by carmakers hoping to pique the Quandts' interest, he said. ``The Quandts have clearly stated recently that BMW is not for sale,'' BMW spokesman Uwe Mahla said, a mantra repeated often in recent days. Quandt family spokesman Thomas Gauly couldn't immediately be reached for comment.

The Quandt family comprises Johanna Quandt, 74, and her two children Susanne Klatten, 36, and Stefan Quandt, 34. Johanna Quandt is the widowed third wife of Herbert Quandt, who bought around 30 percent of BMW in 1960.

Yet some analysts say it's only a matter of time before the huge cost of developing new products -- or the flash of cash --changes the family's mind.

``If someone approached the Quandts with a big pile of money, would they say, `No?''' said Robert Halver, an analyst with Bank Delbrueck & Co. in Frankfurt. ``BMW is a very high-tech company, but they're not big enough to bear the expense of reaching the next level of technology,'' said David Cole, a University of Michigan analyst. He was referred to a new wave of electric-drive powertrain systems that could pave the way for battery, diesel or fuel-cell powered vehicles. ``The trick for companies like that is to make a deal before they get on a downward slope,'' Cole said.

Ford CEO Jac Nasser last week in Chicago denied the company was in talks with BMW but said Ford is still open to expansion through acquisitions. He viewed BMW's management change more as ``a reflection of the Rover difficulties,'' than a willingness to sell all of BMW.

Nasser declined to say specifically what he would do if he were running BMW, but he added, ``One reason we are valued as a great partner is because we do have the answers to those questions.''

Volkswagen Chief Ferdinand Piech said last summer that he wanted a cross-shareholding with BMW.

The latest report from Der Spiegel has VW giving BMW a combination of cash and stock to receive a 24.9 percent stake in BMW while BMW gets a 24.9 percent stake in VW's Audi AG luxury car unit. The stake's size is designed to discourage German and European cartel authorities from taking an interest in the arrangement.

VW recovered from near-bankruptcy earlier this decade by implementing a broad platform strategy -- utilizing the same chassis in several models to cut costs -- something it could duplicate at BMW, analysts said.

For GM and Ford, BMW could boost their luxury car offerings and give them a greater presence in the European market. Last year, GM held 12.7 percent of the Western European car market while Ford, adjusted for its recent acquisition of Volvo AB's car business, held 9.9 percent, according to the European Automobile Manufacturer's Association. BMW held 5.2 percent. VW, with 20.1 percent of the market, would remain European market leader even if GM or Ford bought BMW.

BMW shares rose 10.5 euros, or 1.5 percent, to 732.5, in early trading this morning.

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