JUNE 8, 1998

Volkswagen buys Cosworth!

EUROPE's biggest car manufacturer Volkswagen has agreed to buy Cosworth, the engine-building subsidiary of Vickers.

EUROPE's biggest car manufacturer Volkswagen has agreed to buy Cosworth, the engine-building subsidiary of Vickers. The deal is part of Volkswagen's bid to win control of the Rolls Royce car company, which is also owned by Vickers. Cosworth will supply engines for Rolls Royce cars in the future.

The Rolls Royce and Cosworth deals were agreed by Vickers shareholders at the end of last week and the sales are expected to be finalized in July.

The sale of Cosworth - for $200m - is a blow to the Ford Motor Company's motor racing activities as Cosworth designs, builds and services Ford engines in both Formula 1 and CART racing. It remains to be seen how the sale of the company will affect this year's activities although in all likelihood the contracts will probably run until the end of the season.

Ford has been quick to limit the damage of the announcement, indicating that it has been aware of the possibilities for some time and hinting that it has been working on alternative plans which will be revealed within a few weeks.

This is probably true as Ford looked very hard at the possibility of setting up its own engine-building operation in MiltonÊKeynes a year ago when it was trying to put pressure on Cosworth to produce more reliable engines.

There are many arguments in favor of an in-house Ford F1 engine program and in recent months there has been more and more involvement from Ford in the V10 project. Ford already has all the data on the current Cosworth V10 engine, but we understand that there is a dispute going on over who owns the intellectual property rights to which engines. We believe that there is no dispute over the rights to the 1998 engines, which are codenamed VJ at Cosworth, but there are question marks over whether Ford owns the rights to the 1999 engine (known as the CK) and that this design may go with Cosworth to Volkswagen.

There is little doubt that Volkswagen will not waste Cosworth's racing expertise and will use the purchase of Cosworth to break into topline racing on both sides of the Atlantic. It remains to be seen which of the Volkswagen marques will be used in Formula 1 and which teams will be Volkswagen's partner (or perhaps partners).

We recently hinted that we believe Ford is going to go even further and move into F1 as a complete team, just as Honda is planning. This is most likely to be achieved by the takeover of Stewart Grand Prix - which Ford has largely funded. The only problem to be overcome is that any Stewart takeover will involve the delicate matter of how to get Jackie Stewart out of the picture without it appearing that Ford is dumping the man who has been one of its international ambassadors for the lastÊ31 years.

How this will be achieved remains a mystery but Ford has no shortage of spin doctors to ensure that there will be no loss of face to either party.