BMW Independance Continued - WSJ 3/19/00 (archive)

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As Famed Land Rover Goes to Detroit,
BMW Goes Back to the Drawing Board
An INTERACTIVE JOURNAL News Roundup

BMW's move to sell its Land Rover line of luxury sport-utility vehicles marks the final dismemberment of Britain's largest car-making business and the demise of the German car maker's strategy for remaining independent.

Ford Motor Co. agreed Friday to pay nearly $3 billion to Bayerische Motoren Werke AG to acquire Rover Group Ltd.'s unprofitable passenger car business, a deal that significantly expands the size of Ford's world-wide automotive group, No. 2 in global vehicle sales volume after General Motors Corp.

BMW Is Expected to Shed Rover Cars Unit in Britain (March 16)

But while claiming Land Rover is a nice coup for Ford, the real drama is the demise of BMW's six-year-old strategy for bucking the wave of consolidation in the global auto industry.

Until Thursday, BMW had pinned its hopes on its 1994 purchase of Britain's Rover Group. As recently as last month, BMW executives were still maintaining that Rover was integral to its plans to achieve economies of scale and meet looming European fuel-economy standards.

But at a board meeting Thursday, BMW abruptly pulled the plug on its Rover strategy and on the careers of three senior managers who backed it. In addition to the agreement with Ford to sell Land Rover, BMW arranged to hand over Rover Cars to a venture-capital concern named Alchemy Partners.

The Rover Group debacle has cost BMW billions of dollars in investments and billions more in red ink. It also has left its core-luxury car operations weakened in the face of an onslaught of competition. The upshot of this is that it may be only a matter of time before BMW is forced to align itself with a global automotive network led by Ford or one of the other big players.

Ironically, what put BMW in this position was the failure of its six-year-old effort at gaining the heft to remain competitive and independent. Buying the Rover Group was intended to broaden BMW's offerings and achieve economies of scale.

"When we think of our strategy of developing premium marques, among off-road and four-by-four vehicles we really cannot think of a better group than the Land Rover brands," says Jacques Nasser, president and chief executive officer of Ford.

The likely demise of the Rover car brand -- with its distinctive logo depicting a Viking warship -- means more than the loss of a single struggling nameplate. Rover represented the last stop in a series of consolidations of the once-proud British auto industry. Besides MG, it was also the repository for such classic names as Leyland, Triumph, Morris, Austin, Riley and others.

"Rover was a great name in the U.K. It was the car of the bourgeoisie; the car of the doctor, the vet. The car that exuded the roast beef of old England, if you like," said Cardiff University Business School professor Garel Rhys. "What you're now seeing is the final unraveling."

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