Is the sun setting on troubled Rover?

BMW, owner of the ailing Rover brand, must rescue the car company in less than a year or face takeover by one of its rivals. It is pinning its hopes on the launch of the new Mini and the R30 model.

Rover UK managing director Paul Willis is the latest in a long line of senior executives to turn his back on the troubled car company (MW last week). Willis defected from the job only three months after being moved over from BMW to become a director of more upbeat rival Volkswagen.

Like a conveyor belt, senior managers from other divisions of BMW have been fed into the marketing and sales departments of Rover, taken one look at the hazards of associating their CVs with such a troublesome brand, and left.

So far, the company has had little success in winning back consumers’ faith in the Rover brand. This mission has not been helped by the revolving door of the sales and marketing department.

BMW faces an unpleasant ultimatum: it has less than a year to sort Rover out, or face takeover by a more powerful car company. But the beleaguered state of Rover means it may not survive the shake-out at all.

When BMW purchased the car manufacturer from British Aerospace in 1994, Rover was a company on a gentle upswing. Much of this was thanks to Japanese car company Honda, which owned a 20 per cent stake. It revolutionised the factory technology and taught Rover efficient manufacturing. A few months after Rover’s sale to BMW, Honda pulled out in protest.

From then until last year, the company traded on an obsolescent range of models and paid the price by losing out in coveted fleet sales.

Eighteen months ago, the then chairman of BMW, Bernd Pischetsrieder, gave a speech to the press at the Birmingham International Motor Show which, by highlighting BMW’s problems with Rover, scored a magnificent own goal in eclipsing the make-or-break launch of the Rover 75. Pischetsrieder lost his job a few months later, and very little has gone right since.

Professor Garel Rhys of Cardiff Business School says: “BMW’s first mistake was failing to take enough control of the company in the UK.

“The Rover management was allowed to run its own pricing structure, pricing the mid-range 400 too high, and there was delusion on the board about the strength of the Rover brand.”

These mistakes could not have come at a worse time, allowing keen competition, created by an over-supplied motor trade, to erode Rover’s share.

The options for BMW are grim. The company is holding out great hopes for the launch of the new mini at the start of 2001 and has set an ambitious target of 200,000 sales in its first year.

BMW believes that a successful new Mini will create enough momentum to drive people into the Rover showrooms again. It is fervently hoping that these same customers will suddenly notice how good, and reasonably priced, its smaller Rover 25 and mid-range 45 cars are.

If, however, the company does not experience a rapid turnaround of the Rover brand, BMW’s long-term independence looks in doubt.

There is widespread speculation that if the company fails to improve sales performance in the near future, it may have to pull the plug on its proposed launch of its next car, the enigmatic R30, in two years’ time.

BMW would then have little option but to sell Rover, the Longbridge factory, and possibly itself.

Last year, the &£42m advertising business was reviewed out of Ammirati Puris Lintas and put into the hands of M&C Saatchi. At the time, Rover marketing director John Sanders said he was taking on M&C because of the success the agency had had with other UK brands, particularly British Airways.

The advertising industry watched with interest to see what the ads for the 25 and 45 would be like.

“After a delay, the campaign appeared and was a disappointing mix of previous ads and unclear brand strategy,” says one source.

Sanders claims the ads are distinctive and says Rover will continue the theme in future as it has often been accused of inconsistency in its approach to advertising.

Since joining over a year ago, Sanders has seen Rover subjected to non-stop bad press, a senior-level management clear-out and sales in his brand dropping by 11 per cent year on year.

He says: “Dealers tell me that every time a Sunday paper writes a negative story about us, traffic through the dealership has been slow or orders [for cars] cancelled.”

Looking forward, Sanders says Rover’s strategy is not to position itself as an overtly UK brand. The company does have a number of links with events such as the British Fashion Awards, but he says this is more about associating the company with successful enterprises.

Sanders says Rover cars are “classical” in design. The point he is making is that other manufacturers, particularly Ford with its avant garde Focus, are producing “new age stuff” which may rapidly date.

The company’s fortunes will be rejuvenated in about six months’ time, says Sanders, although he is quick to concede that revival will not be immediate: “These things take time.”

He believes internal attitudes are more positive now that Rover has been properly integrated into the BMW Group’s UK operations, headed by Gabriel Falco.

Both the 45 and 25 have yet to be sold with their upmarket extras – such as the GTi format and Formula 1-style steptronic gearboxes – all of which should make the cars a more attractive proposition, according to the company.

Rover has now stepped up its corporate marketing and aims to claw back fleet share. The big problem, as perceived by the company, is the continuing negative press.

“If you were a fleet manager, would you buy a load of cars after having just read that there may not be a future for the company?” says Sanders.

Sanders denies there is any doubt over the R30 launch. However, he refuses to comment on the class it will be positioned in, or an approximate launch date. He will only say that it is something “completely new”.

BMW has been mooted as a takeover target for both VW and General Motors – speculation which is vigorously denied by the Quandt family, who still own about 50 per cent of BMW’s shares.

BMW’s determination to stick with Rover – dubbed “The English Patient” – has already been tested to the limit. The next 18 months will see if BMW has the courage and financial strength to hold out. Success will depend heavily upon the reception of new models, particularly the Mini.

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