Re: $250,000 for a VOLKSWAGEN?

[Paul_Royal@idx.com]

Here's more ...or less

Friday November 14 10:43 AM EST

VW Joins the Hunt for Rolls-Royce

By John Gilardi

FRANKFURT, Germany (Reuters) - Volkswagen AG Friday officially joined the
hunt for luxury carmaker Rolls-Royce, changing its mind
and confirming for the first time that it was now interested in buying one
of the great icons of British style.

"I can confirm that we are interested in principle," VW spokesman Klaus
Kocks told Reuters.

VW shares, which have tumbled 40 percent since peaking this summer at 1,500
 marks ($867), ended bourse trade Friday down 7 marks
($4) at 906 marks ($523.40) after initially posting gains. The 30-share DAX
 index rose about 1 percent.

"Rolls-Royce seems to be extremely expensive," said French bank BNP, noting
 that the British carmaker will likely fetch a purchase price
of between 900 million ($519.9 million) and 1.2 billion marks ($693.2
million) -- up to double its 1996 sales of 690 million marks ($398.6
million).

But others said that a bid by VW, the largest carmaker in Europe and
best-known for the Beetle, makes sense.

"I think VW can gain a lot," said Lothar Lubinetski, an auto analyst at
Eskinda Corporate in London. "The question is whether there is
spillover from the Rolls brand. It will not be immediate, we are talking at
 least eight to 10 years."

Rolls-Royce parent Vickers Plc, which has put it up for sale in an auction
process, dismissed a report in Germany's Handelsblatt
newspaper Friday which said that VW had already beaten rival BMW AG in the
race.

Vickers has also denied that BMW can trump rival bids for Rolls-Royce, a
byword for British style and quality for almost a century.

BMW, which two years ago reached a deal to supply engines for future
Rolls-Royce and Bentley models, had previously been the only
 carmaker to publicly express interest in buying the carmaker and was
regarded to be close to locking up the deal.

The Munich-based carmaker, which also owns Britain's Rover Group, is still
tipped as the top favorite to win Rolls.

BMW, reaffirming Friday its desire to buy Rolls, is likely counter VW's bid
 by vowing, if it does not win, to cancel the deal to build engines
 that will go into a range of limousines and sportier Bentley models at the
 turn of the century, industry sources said.

Another crucial factor favoring BMW is that the rights to the Rolls-Royce
name remain with Rolls-Royce Plc, the aero engine manufacturer
that was split from the car division when the joint business went bankrupt
in 1973.

BMW has a successful joint venture with Rolls-Royce developing aero engines
 for commercial aircraft. Industry observers say
 that relationship was crucial in BMW getting the Rolls engine contract
over Mercedes.

The aero engine maker has indicated that it would have the right of veto if
 it did not think the buyer was worthy.

Officials at VW, which is estimated to have 16 billion marks ($9.2 billion)
 of reserves, said their new V-12 engine put on display at the
 Tokyo motor show would be viable for the Rolls models.

Industry observers also said VW has already installed the 5.8-liter engine
in its Audi A8 top-line luxury model and that it could be ready
for production by the turn of the century.

They said an auction of Rolls would last about four months and more suitors
 could emerge in coming weeks despite a series of denials
of interest.

Potential bidders mentioned include Ford Motor Corp., Germany's
Daimler-Benz AG, Fiat of Italy and Japanese carmaker Toyota Motor Co.

VW's statement on Rolls came after it stoked takeover talk late Thursday
with a terse statement saying that it was now not ruling out an
acquisition in the auto business.

The carmaker has long denied it would go on a buying spree even though it
wanted to raise six billion to eight billion marks ($3.5 billion to
$4.6 billion) in a share offering that has now been put indefinitely on
hold due to market turbulence.

VW Chairman Ferdinand Piech said at the Frankfurt car show in September
that VW's brands, which also include luxury brand Audi,
 Czech-based Skoda and Spain's SEAT, were enough.

But Piech has made clear that he wants to take on BMW and Daimler's
Mercedes-Benz by creating more upscale products as both
 rival carmakers try to target price-conscious consumers.

One example of VW's efforts to become more upscale is the redesign of its
Passat saloon which is viewed as good competition
against the entry-level Mercedes C-Class saloon.

Acquiring Rolls-Royce would give VW major firepower to fight Mercedes,
which is competing directly against the best-selling VW Golf
 with the new A-Class.