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. Last Updated: 07/27/2016

BMW Boss Fired Over Rover Losses




FRANKFURT, Germany -- The future of BMW hangs in the balance after the sacking of chairman Bernd Pischetsrieder and speculation from DaimlerChrysler AG that the luxury German automaker may be ripe for a takeover, analysts said over the weekend.


Pischetsrieder was dismissed Friday after failing to restore to profit BMW's loss-making British unit Rover, which he made the decision to acquire in 1994.


BMW must now either restore Rover quickly, and survive as a medium-sized producer in the rapidly consolidating car industry, or face the likelihood of being snapped up by a larger rival, analysts said.


"They are not in a desperate position. It's a good brand," said Jonathan Storey, British-based director of European Auto Research. "If they turn around Rover, they should be in with a reasonable chance of surviving."


He said BMW had broken the back of the Rover burden and that economies of scale would start to feed through to the group's bottom line over the next few years.


"It takes five to 10 years before you can integrate a model range with your own and start to see some payback," he said. "As the industry consolidates they are going to become a medium sized player but that doesn't mean they can't be profitable."


But the big players in the car market may already be lining up to bid for BMW.


DaimlerChrysler co-chairman Robert Eaton said Friday that he expects three to four bidders to emerge following the change in the Munich-based group's leadership.


"I figure by Monday, there will be at least three or four companies bidding for BMW," he said. "We're not one of them, I guarantee you."


In a surprise move, BMW replaced Pischetsrieder with its engineering chief Joachim Milberg on Friday. Many industry analysts had expected management board member Wolfgang Reitzle to succeed Pischetsrieder and to wield the axe at Rover.


"I think you'll start to see a lot of activity around that," Eaton said. "That was not a normal management change. ? I suspect there might be a little action by our competitors."


He indicated that General Motors Corp. may be among the bidders. GM has flatly denied holding discussions with BMW.


Analysts said the future of BMW now depended on whether the Quandt family, the major owner of BMW shares, was prepared to sell its 45 percent controlling stake.


"With acquisition prices rising, a sum-of-the-parts calculation suggests BMW could fetch 20 billion to 21 billion euros, nearly a fifth more than the current market value," said the influential Lex column in the weekend edition of the Financial Times.


"Unless the new management can deliver a speedy turnaround of Rover, a juicy offer could tempt even the controlling Quandt family, which has so far jealously guarded BMW's independence," the column added.


The Quandt family on Friday reaffirmed its commitment to its holding in BMW and denied takeover rumors.


But with the large carmakers ready to pay big cash to complement their existing product lines with niche-sector models, the family may receive an offer that would be hard to refuse.


"I think the family might feel more pressure to sell at the moment as there is a move to consolidate in the industry," Storey said. "Certainly they would extract a high price."


He said Rover had suffered a large drop in revenue in the last two to three years after dropping its R100 model, which he said accounted for 28 to 30 percent of sales, without replacing it.


The launch of the new R75 family car in May this year was Rover's chance to show that it was a viable concern, Storey said.


"Rover's been given sufficient rope to either succeed or hang itself," he added.