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. Last Updated: 07/27/2016

BMW to Invest $15Bln in Rover Plant

LONDON -- German carmaker BMW announced a bigger than expected investment package to salvage its British loss-making subsidiary Rover, after extracting state aid from London on Wednesday.

Committing itself to the future of Rover, BMW AG said a third of its annual investment of some 30 billion Deutsche marks ($15.8 billion) in products, production facilities and distribution over the next five years would be channeled into Britain.

It said it had reached an agreement with the British government on pounds 152 million ($241.3 million) of state aid to underpin new investment at Rover's biggest plant, Longbridge, in the city of Birmingham.

The British aid must still be approved by the European Union, whose competition commissioner, Karel Van Miert, recently expressed doubts.

London and BMW - which will invest some pounds 600 million a year in Britain - said they were confident of approval.

The aid deal comes after months of hard bargaining during which a deal at times looked elusive, with BMW hinting it would not invest further in the troubled plant unless it was happy with the sums the government was offering.

The deal will inject pounds 1.5 billion to support the production of a new medium-sized car range replacing the Rover 200 and 400 series.

Added to some pounds 700 million earmarked for the new Mini, the total BMW investment in the plant is about pounds 2.2 billion - more than unions had originally expected.

"As a result [of the agreement] the Birmingham plant is also a long-term part of the BMW production alliance," said Joachim Milberg, chairman of Munich-based BMW's management board.

At a London news conference to unveil the deal, he said he expected Rover to break even by 2002 - a two-year delay on an earlier deadline blamed on the continued strength of the pound.

"The 2000 [target] was made at a time when the pound was at a level of 2.6 marks and now it's at 3 marks," Rover Chairman Werner S?mann said at the same news conference.

The deal is estimated to have saved some 50,000 jobs in the region, including 9,500 at Longbridge.

The Bavarian automaker said it had no plans for further job cuts at Rover after unions last year agreed to 2,500 job cuts at the plant, as well as the introduction of flexible work practices.