piech offers bmw/rover the golf

["Dave Eaton" <Dave.Eaton@clear.net.nz>]

reported today by the sunday times...

VOLKSWAGEN is offering to give BMW use of its Golf platform to develop a new
small Rover at the Longbridge plant in Birmingham. In return, Ferdinand
Piech, VW's chairman, wants to take a 24.9% stake in BMW and to build
Volkswagens and Audis at Rover plants. He is also offering BMW a 24.9%
reciprocal stake in Audi.

Piech has employed Morgan Stanley, his adviser during last year's bid battle
with BMW for control of Rolls-Royce and Bentley Cars, to draw up the
tempting proposal.

Piech believes a manufacturing presence in Britain would enable him to reach
his goal of taking 10% of the British market with the Volkswagen brand. He
has said that, after achieving strong growth in France and Italy, "the next
target is England". At present, the Volkswagen brand has 6% of the market,
although the VW group, taking in Audi, Skoda and Seat, has 9%.

But BMW is expected to rebuff Piech's initiative as it did when the VW boss
made his first approach to the Munich manufacturer last year. At that time,
Piech suggested a full-scale union. Eberhard von Kuenheim, BMW's supervisory
board chairman, dismissed Piech's advances. Von Kuenheim said BMW might
consider the approach if the state of Lower Saxony, which owns 16% of VW,
was prepared to sell its stake to BMW.

Piech, who knows that Ford also wants to buy BMW, has renewed his advances
since the board meeting nine days ago that ended in the resignations of
Bernd Pischetsrieder, executive chairman, and Wolfgang Reitzle, his deputy
and rival.

Ford is poised to hire Reitzle to head engineering development in Europe.
Ford is also prepared for a deal that would allow BMW to develop a Rover
200/400 replacement off its Focus platform.

Joachim Milberg, Pischetsrieder's successor, is now understood to be
conducting a review of BMW's operations worldwide. But he is focusing on
Rover because of the need to cut its huge losses - estimated to have been
about £500m in 1998 - and decide whether to stick with Pischetsrieder's
strategy of replacing the Rover 200 and 400 with a new small-to-medium model
aimed at selling 450,000 cars a year.

That could be badged Rover or Triumph, or it could be a BMW 2-series. Or BMW
could develop both a 2-series and a new Rover. However, BMW is believed
likely to stick with its own platform rather than take one from a
competitor.

Milberg, Werner Sämann, Rover's chairman, and their colleagues are meeting
in Munich this weekend. They aim to complete a new strategic plan next
month. Experts say they are likely to proceed with a plan to invest £1.35
billion to transform Longbridge, safeguarding up to 50,000 Midlands jobs,
although the 14,000-strong Longbridge workforce could be more than halved.

As The Sunday Times has revealed, the government is ready to support the
Longbridge makeover with a £150m aid package. Stephen Byers, trade and
industry secretary, knows Longbridge's prospects will improve if investment
is made in the aged factory.

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