Honda website
Honda website

NOVEMBER 15, 1999

Will BMW troubles affect Williams?

THE German car manufacturer BMW continues to struggle with its Rover Group subsidiary with reports in the German papers in recent days suggesting that the Quandt Family, which controls around 45% of BMW's shares, are beginning to lose patience with the company and may decide to sell out to one of the car companies interested in buying BMW. The rumors follow reports that further expensive restructuring is needed at Rover and that the new Rover 75 model, which was designed to restore the company's fortunes, is not selling well.

In 1998, BMW profits were down to $480m because Rover made a loss of nearly $1bn and it is estimated that by the end of 2000 Rover - acquired by BMW in 1994 for $1.2bn - could have cost the German company as much as $7.2bn. BMW had tried to cut costs and jobs in Britain but this has resulted in opposition from the British government and from unions. Despite the restructuring Rover's sales and productivity have slumped. The Rover plant at Longbridge produces 33 cars a year per worker. In comparison the Nissan factory in Sunderland, England, turns out 98.

Battles over what to do with Rover resulted in the dismissal earlier this year of BMW's chairman Bernd Pischetsrieder and the company's head of sales and marketing Dr. Wolfgang Reitzle. The problem remains.

Ford, Toyota, General Motors and Fiat are all rumored to be interested in acquiring BMW but if the Quandts do decide to sell their shareholding it is unlikely they will let it go to anyone other than Volkswagen. A share swap with Volkswagen could see the family emerge as the biggest shareholder in the VW empire.

A Volkswagen takeover would probably not have any serious effect on the F1 engine program - as Volkswagen is already looking at F1 - but a takeover by Ford, Toyota or Fiat might be disastrous.