Sitting here in London, it is easy to get carried away with the Rover saga. After all, in England it is a big issue. Big enough to threaten thousands of jobs and possibly big enough to topple a government minister.
Stephen Byers, the British trade and industry secretary, is under fire because he allegedly knew BMW's intentions well before the end of 1999. The British public already was alarmed by the announcement of the sale of Rover Cars to the Alchemy Group, a virtually unknown venture capitalist firm. The alarm bells jangled louder when the Financial Times announced that Honda UK was halving output because of the strength of the pound sterling. As if that weren't bad enough, Ford Motor Co. now threatens to close its Dagenham assembly plant.
Once again, Britain's motor industry appears to be on the rocks. With Tony Blair's Labor government reaching the end of its honeymoon period, would it be a big enough issue to bring down the whole party when the next election comes around?
I think not. The handling of the situation by BMW, Rover and the country's department of trade and industry really comes down to one thing: bad management. BMW blames Rover's failure on the strength of the British pound sterling. OK, it is a problem, but no more so than for Ford, Vauxhall, Peugeot, Nissan, Toyota and Honda, all of whom produce cars in England. They seem to be managing, and in some cases, even flourishing.
Ford's problems with Dagenham have more to do with too much production capacity in Europe than with the strength of the pound. And as far as Honda is concerned, the Financial Times has gotten it all wrong. Honda actually plans to create 1,000 jobs at a second plant it is constructing next door to its existing factory. This will boost production capacity to 250,000 units, up from 150,000 units today. Honda's production volume will drop 13 percent this year, but that's largely because the company is retooling to add the CRV to its lineup.
More than 70 percent of Honda UK's components come from British companies. Out of 250 component suppliers used by Honda, 186 are based in the United Kingdom.
The company admits the strength of the pound is a problem and that it loses money on the cars it exports from Swindon. But Minoura Harada, Honda's chief European executive, calls this a temporary problem. 'Once we decided to expand at Swindon, it was our responsibility as a manufacturer to reach sufficient volumes,' he said.
Peugeot also is doing well in the United Kingdom. Employees at its Ryton plant have received record productivity bonuses. Last year, Peugeot's UK operation earned $150 million. So far this year, sales of the Peugeot 206 are up nearly 44 percent in the United Kingdom.
Engineering union chief Sir Ken Jackson, who represents employees at Peugeot and Rover, noted the contrast between the two plants. 'How is it that the future for one is so bleak, and the other is so bright?' he asked. 'The difference is BMW. This is a terrible indictment of their handling of the situation.'
BMW's handling of Rover has been a comedy of errors. The new 75 confused the important fleet market in the UK because it does not fit in any recognized segment. The 25 and 45 have been too long in coming, while the new Mini was shown to the press at the Frankfurt auto show two and a half years ago, yet still has not appeared on the road.
How did BMW get it so wrong while Peugeot has been getting it right? Andrew Blair-Smith of Commerzbank told me Peugeot buys more non-British parts. 'But blaming the currency is sour grapes when you look at the success Ford has made of Jaguar, he added. 'BMW's insistence on blaming the pound is a convenient excuse to cover up the failure of its strategy.'
Chris Wright is International Editor of Automotive News International. He is based in London. You can email him at automotiveinternational @compuserve.com.