Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Beleaguered Rover Sold on the Cheap




LONDON -- For the symbolic sum of pounds 10, BMW of Germany sold its money-losing Rover subsidiary Tuesday to a British consortium that wants to maintain the troubled British automaker as a mass producer of cars and guarantor of thousands of British jobs.


The purchase price, equivalent to little more than $15, was offset by a heftier promise of a $767 million loan from BMW to enable the buyer, the Phoenix Consortium, to take over the company.


The deal, struck with surprising speed after the collapse 11 days ago of negotiations between BMW and a British venture-capital firm, Alchemy Partners, seemed at least for now to avert the threatened closing of Rover's Longbridge plant near Birmingham in the British Midlands industrial belt.


The plant employs around 9,000 people - half of Rover's work force - and provides jobs for more than 20,000 others in the supply business. BMW had said it would shut down the plant if no buyer was found by the end of this month.


The terms of the sale showed how desperate BMW was to cut its losses. But analysts said the consortium faces an enormous challenge if it is to succeed where BMW failed after a six-year, multibillion-dollar investment. The British pound is at a stubborn high against the euro - making exported British-made cars more expensive in mainland Europe and imported rivals cheaper. And, without mass sales, analysts said, it is difficult to see how Rover can generate income to develop new models to replace its compact 25 and 45 sedans.


John Towers, a former Rover chief executive and prominent Midlands businessman who leads the Phoenix Consortium, said the company aims to produce 203,000 cars a year, slightly below its output of 220,000 in 1999, and would be profitable in two years. While BMW's previous negotiations with Alchemy Partners had been expected to lead to thousands of job losses, Phoenix said there would be fewer than 1,000 layoffs at Longbridge.


Towers' consortium is supported by labor unions, Rover dealers and the British government. Apart from BMW's loan, Phoenix's financial backing includes an offer of $315 million in credit from Burdale Financial, a London-based division of First Union of Charlotte, North Carolina.


"I'm hoping we can calm the situation down and get on with making cars,'' Towers said in a television interview. Towers indicated at a news conference that he was considering an alliance with a major car producer, possibly Honda, a collaborator with Rover before its sale to BMW. At that time, Towers was Rover's chief executive. He left a year after the BMW takeover.


Some analysts remained skeptical of Phoenix's prospects, arguing that Rover did not have the scale to compete in a marketplace dominated by giants like Ford, Volkswagen and General Motors. "I suspect this just prolongs the agony,'' said Graeme Maxton, an auto-industry consultant.