LONDON - Less than a month after Volkswagen AG paid £479 million ($795 million) for Rolls-Royce Motor Cars Ltd., it gave away the name to rival BMW AG.
'I want to invest in a new brand,' said Volkswagen Chairman Ferdinand Piech. 'Not spend on other issues' like lawsuits over the Rolls name.
Volkswagen will keep and develop Bentley, BMW will get the Rolls-Royce brand in 2003, and the two companies will work together to distribute both brands through existing dealers afterward.
The deal, signed on a golf course in Neuberg, Germany, early Tuesday morning, is expected to halt a decline in sales at Rolls-Royce that began after Vickers plc agreed 5 June to sell the company to Volkswagen. After signing their pacts, the executives flew to London for a press conference at noon, then flew to Germany for more press events.
Rolls-Royce Chairman Graham Morris, who quit two days later, said at the press conference sales of the new Silver Seraph were 30 percent below expectations in the past six weeks. London Rolls-Royce dealer Nick Lancaster said dealers and customers support the deal. Rolls-Royce workers were happy to resolve the engine supply deal but unhappy to lose the Rolls-Royce name to BMW, said an executive at at the company.
When Volkswagen closed the deal for Rolls-Royce on 3 July, talks began with BMW. 'We talk all the time,' said BMW Chairman Bernd Pischetsrieder. 'I'm not going to give you details.'
On 28 July, BMW AG paid £40 million for the automotive rights to the Rolls-Royce name to Rolls-Royce plc, an aerospace and jet engine company. Then, said Piech, BMW gave the rights to the Rolls-Royce brand to Volkswagen until 31 December 2002 and agreed to keep on supplying engines and other components in the meantime.
All three companies said the deal was fair for everyone. Bernd Pischetsrieder grinned broadly. Rolls-Royce plc Chairman Sir Ralph Robins smiled and raised his bushy white eyebrows. Ferdinand Piech flashed his light blue eyes in rare good humor. 'I was satisfied all the way down with the deal that we did,' said Piech. 'We thought it would cost 50 percent more than we paid.'
Until 31 December 2002, Volkswagen will make the Rolls-Royce Silver Seraph and the Bentley Arnage at the Rolls factory in Crewe, UK. The company then becomes the Bentley Motor Car Co. The factory will continue to make bodies in white for the Silver Seraph and supply them to BMW's new unnamed Rolls-Royce assembly company.
BMW's new company will have a factory in England. Rolls-Royce plc will invest the £40 million it receives from BMW into the new company and get a seat on the board.
BMW AG will continue to supply engines and other components to the Silver Seraph and the Arnage for the life of the cars, '10 years or more,' according to Piech.
Volkswagen will also develop new engines for Bentleys, to be built either by Bentley or by Cosworth, the UK engineering and engine company Volkswagen bought from Vickers a few days after it bought Rolls-Royce Motor Cars.
And Volkswagen will introduce its new mid-sized Bentley in 2002 or 2003. Piech said Bentley sales will rise to about 3,000 for the Arnage and 7,000 for the new car.
This year, the Bentley Arnage and Rolls-Royce Silver Seraph are selling at equal levels, said Rolls spokesman Richard Charlesworth. Sales of two-door models raise the Bentley share to about 65 percent.
A small part of the deal was that BMW's Rover subsidiary will continue to source crankcases from Cosworth for a new product under development.
'I would have preferred to keep both brands,' said Piech, 'but I'm very satisfied. My first target was just one brand over Volkswagen.'
VW also bought Lamborghini in July, and that will be positioned above Audi, said Piech. Bentley will be positioned above Volkswagen. Piech said after the press conference that Volkswagen would not revive the Horch brand.
The executives said the questions of cooperative distribution were still open and would be resolved over the next four-and-a-half years.
Piech and Pischetsrieder said German government pressure was not a factor. 'They like that we didn't have a lawsuit,' said Piech, 'but we didn't need a moderator.'
While the three chairmen expressed general joy at the day's events, Pischetsrieder took the opportunity to criticize Vickers for the way it handled the eight-month selling process.
'If anything was distasteful it was the auction process by the previous owner,' said Pischetsrieder. He said they sold the prestigious automobile brand 'like fake Persian carpets manufactured in India.'
Had there been no deal, said Piech, Volkswagen would have had to:
Acquire rights to the Rolls-Royce name by buying it or suing for it.
Pay much more for parts to replace those supplied by BMW. ('I can replace engines within a year, but other components would have been much more costly.')
Work hard to keep sales from slipping. 'The customer is most important,' said Piech. 'If there is a big legal debate, nobody will buy a Rolls-Royce.'
By their questions, many journalists clearly doubted that Piech was as happy as he said he was. However, the Volkswagen chairman had foreseen almost the exact scenario in January, when he was at the Detroit auto show.
He said then that he wanted Bentley for Volkswagen and that Rolls-Royce made a better fit with BMW. And he said Volkswagen and BMW could form a partnership to run Rolls-Royce. 'I have lived in Bavaria for 21 years,' he said, 'and I know how to get along with Bavarians.'
Pischetsrieder and Piech said talks with BMW over sharing Rolls-Royce didn't begin until after the 3 July completion.
'If we would have met before the completion,' Piech half-joked, 'the price would have been much lower.'