Volkswagen zooms in on BMW

THERE are signs that Volkswagen is once again moving towards a bid for the BMW car company and, having been rebuffed in the past, Volkswagen boss Ferdinand Piech is now aiming for a deal which will help BMW out of its problems with the RoverĘGroup.

BMW has been suffering enormous losses with Rover in recent years and all the signs are that the 1999 loss will be another $1bn. The new Rover 75 is not selling well and Rover's losses are expected to continue. The Quandt Family, which controls half of the BMW stock, is running out of patience. Stories in England suggest that Volkswagen is offering BMW a deal which would see VW taking over Rover so it can build Volkswagen Golfs alongside Rover products at the Longbridge factory. In exchange VW would provide BMW with production lines for the new Rover 30 model - which would save considerably on investment. In addition there is expected to be further trading over Rolls Royce which BMW currently owns but will have to hand over to Volkswagen in 2003.

Such a partnership would probably lead to an agreement for the two companies to exchange shareholdings which could result in the Quandts becoming the major shareholders in Volkswagen. It is also possible that Piech will agree to hand over the management of the Volkswagen empire to a BMW man when he retires at the age of 65 in April 2002. The obvious candidate is Bernd Pischetsrieder who was BMW chairman until a boardroom battle a year ago after which he and rival Wolfgang Reitzle both left the company. Reitzle is now running Ford's luxury car brands, including Jaguar, which this year launches an aggressive F1 program in an effort to snatch BMW's luxury car market. Pischetsrieder will become head of VW's Seat division later this year - with a seat on the Volkswagen board of directors.

Both Pischetsrieder and Piech are keen on Grand Prix racing as a means of showing off the capabilities of a car manufacturer and so the BMW F1 program is unlikely to be affected by any of these moves although a merger would bring together the best brains of the BMW and VW sporting departments. This might also be useful for BMW as there have long been rumors that Volkswagen's Audi subsidiary has a V10 Formula 1 engine program...

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