In: Freyssenet, Michel, Shimizu, Koichi, Voplato, Giuseppe (eds.), Globalization or regionalization of European car industry?, 2003, Palgrave, 170-197.

Andrea Eckardt, Matthias Klemm

THE INTERNATIONALIZATION OF A PREMIUM CAR PRODUCER: THE BMW GROUP AND THE ROVER CASE

The Nineties have been a decade of internationalization in the automotive industry. There have been spectacular events like the DaimlerChrysler merger and the Renault engagement in Nissan, all following the leading vision to get a global player. The first to make the headlines at the beginning of the nineties has been BMW who decided to take over Rover. About half a decade has passed on now, and BMW has just decided to part from Rover. The developments that lead to that step allow for new insights that will rectify the former expectations towards adding or incorporating a new company as an easy way of going global. Different profit strategies (Boyer, Freyssenet 2000) meet and can collide. The trajectory approach allows for a comprehensive understanding of the making and problems of profit strategies. We will therefore first take a rather short glimpse at the first and second phases of the BMW trajectory, afterwards switch our view to the history of the Rover group, then we are going to talk about the linking of both. We will show the different approaches of BMW towards the intertwining of the two firms which reflect the BMW management‘s efforts to handle the Rover crisis. In the last chapter, we will discuss problems and the future outlook of the smallest still independent international car maker – the BMW group.

1. THE MAKING OF BMW AND ROVER

The BMW company came into existence in 1916 then called the Bayerische Flugzeugwerke AG. Back then it only produced aircraft turbines. In 1928, five years after starting the production of motorcycles, BMW purchased the Eisenach car factory in East-Germany. Its history of manufacturing self-developed cars began one year later in 1929.After the dismantling of the production facilities in the postwar-period BMW continued producing motorcycles in 1948 and cars in 1951. The following decades of business activity can be divided into three phases: the first one is the 50s – a time of trial and error in its product strategy, characterized by undercapitalization, the second one from the 60s until 1992 – including consolidation, expansion and most important the shaping of the modern profit, product and sales strategy, and the third, still ongoing phase of internationalization, the purchase of Rover being an important part and parcel of a new globalization strategy.

1.1. BMW IN THE FIFTIES: A PHASE OF TRIAL AND ERROR

While being successful in the motorcycle business, the first phase of automobile production of BMW turned out to be a number of set-backs in its product and profit strategy. Both the strategy of producing premium-class ‚motorway-vehicles‘ (type 501) plus sportive cars (the other 500 types) and the production of the small car Isetta under licence of the Italian company Rivolta

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since 1954 couldn't bring the car division into profit zones (Bochum 1999: 6p). There are several reasons why: First of all BMW never managed to reach the necessary volume especially in the upper class segment and the small profits made with the Isetta sales couldn't close the gap (Lewandowski 1998: 64). Supplementary the now existing model range – the Isetta was thought as part of a league-climber program for the BMW motorcycle costumers – led to a certain vagueness of the BMW image because of the diversity of the segments for which the company produced cars (Rosellen 1983: 150pp).The inability to implement a coherent profit and product strategy plus the chronic undercapitalization forced the management into a trial and error strategy and thereby drove BMW into its first and up to now deepest financial crisis (5,9 million minimum-loss and exhaustion of about half of the reserves of the original capital) in 1959 when various competitors offered to take over the company. After refusing the offers of General Electric, Ford, AMC and the Rootes Group and although the 1959 launched BMW 700-series became a popular model, the management board and the powerful stakeholder Deutsche Bank wanted to accept the offer of Daimler-Benz for a cooperation. Daimler set a deadline, that the decision had to be made at the general assembly on the 9th of December 1959. Yet, the small shareholders protested and succeeded in achieving an adjournment because of mistakes in the annual loss account: the costs for developing the new 700 model were illegally registered for one year. This automatically meant the rejection of Daimler's offer! Thus, the company still being independent, the financial problems remained unsolved until the brothers Harald and Herbert Quandt, leaders of one of the biggest capital groups in Germany, bought the majority of the BMW shares in March 1960 – replacing the Deutsche Bank – and began to play an active part in the firm's buisness activities. BMW then sold the aircraft-turbines divison (the Allach plant) and increased the capital. Enough money was gained to build and launch a new middle-class car in 1961/62 (Bochum 1998: 7; Rosellen 1983: 174pp). In 1963 the shareholders received a distribution of dividends for the first time within twenty years (profit: 3,82 million German marks; Rosellen 1983: 194).

The relationship between management and workers resp. their representatives played an important role in the crisis, too. It may be characterized as trustful and based on close personal relationship (‘co-management‘-style). In those days the Quandts’ efforts to save BMW were heavily supported by the then head of the works council Golda. This relationship represents an important trajectory element of the firm and still plays also played a decisive role in the recent Rover crisis (see below).

1.2. THE SHAPING OF THE MODERN BMW COMPANY (1960-1992)

With the Quandt engagement the BMW company clearly changed its capital strategy towards a long-term orientation. In the following years a coherent image and model strategy was forged which turned out to be highly successful and remains unchanged in its core elements up to this day.After half a decade of stabilization and expansion in the 60s when BMW purchased the Glaswerke, its former competitor in the small cars segment in 19671, adding two new plants in

1 A few years earlier the situation had been quite different: there had been serious considerations whether Glas should take over the weakened BMW company. Yet meanwhile the Glaswerke had failed at trying to upgrade its product range due to the absence of a reputation in the upper market segments (Rossellen 1983: 169). The

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Dingolfing and Landshut to the Stammwerk und headquarter in Munich, BMW reached a production volume of 144.704 cars. In 1969 the former chairman von Kuehnheim of the Industriewerke Karlsruhe which also belonged to the Quandt-Gruppe took over the position of the BMW managing director which he kept until 1992. Under his leadership the company more than trippled its production to over 500.000 units in 1989. Several steps were taken to achieve this:In terms of product strategy the company established and sharpened its image of a producer of sportive, innovative and high technology cars in the premium market segments in the 70s. The 5-series was introduced in 1972, the 3-series in 1975 and the 7-series in 1977, all of which are still well known, presenting both the traditionalist element of the profit strategy and at the same time the core element of the BMW success story. Additionally some niche products were introduced to the market, e.g. the 6-series in 1977 (Lewandowski 1998: 76pp). In the 80s, in order to meet the growing market demands BMW expanded and implemented a clearly national resp. regional industrial complex centered in Bavaria in the south of Germany, just around the headquarter of the company. To the production and component facilities in Munich, (the motorcycle production was shifted from there to Berlin in the 60s), Dingolfing and Landshut a new greenfield plant was added in Regensburg in 1984 and a component and supplier park was built in Wackersdorf (1989). After the German reunification a further component plant was re-opened in its former East-German site in Eisenach (1990). In 1983 BMW established a new engine plant in Steyr/Austria close to its Germany-based production network, which therefore should not be seen as a move towards internationalization. Last but not least in 1987 BMW opened the FIZ (Forschungs- und Ingenieurszentrum) in Munich as the ‚brain‘ of the company's R&D-activities. R&D, technical planning, production engineering, quality assurance, value analysis and controlling, purchase, logistics and human resource management were all brought together under one roof (see table 1). Concerning the suppliers BMW can be seen as one of the first European automobile producers to re-organize its supplier relations towards global and system sourcing (see Casper 1995). Already in the 70s BMW started to establish an international net of purchase offices and opened the first international office for global sourcing in 1983. Also in the 70s the company began to adopt a long-term orientation towards its supplier relationship, subsequented by the development of system suppliers and the systematic introduction of just in time principles in the middle and late 80s. Nowadays BMW and the system suppliers simultaneously engineer new products and production processes, by doing which BMW sees itself as ‚system integrator‘, with the degree of in-house production continuously declining.Besides the above mentioned BMW proceeded on restructuring of its production and working processes due to increasing demands on product complexitity and time flexibility. As long ago as twenty years parts of the firm were divided up into cost and profit centers. It should be mentioned that BMW made some internationalization experiences in this phase. In order to prevent high import tarifs a CKD-plant was built in Portugal in the late 50s and in Rosslyn/South-Africa later in 1973. In spite of these activities BMW followed an export-orientated strategy up to 1992. Only in terms of sales and sourcing the company took efforts to internationalize its business by erecting foreign sales bureaus in the most important markets, for example in the US in 1975.

Up to 1992 BMW can be characterized as a company pursuing a nationally/regionally centered production strategy with a strongly interlinked production network and a clear export-orientated

Glaswerke had produced the Goggomobil, a car similar in size and shape to the Isetta.

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sales strategy.2 It created cars for the premium car segments in all major car markets with a distinct and long-term orientated product pilosophy. As well is the overall profit strategy long-term orientated since the company became a family-owned business in the early 60s. It turned out to be very successful for the product, sales, and production strategy being coherent and supported by an appropriate capital strategy of the Quandt family.

We will now take a short glimpse at the Rover history, keeping in mind the successful trajectory of BMW after the heavy crisis in the late 50s. We want to point out that at least up to 1982 the development of Rover took quite the opposite path compared to BMW. Despite the successful surmounting of a serious crisis Rover didn´t manage to recover from severe internal and external problems and therefore went through different rescue strategies and even ownerships. From 1982 onward Rover indeed stabilized production figures in cooperation with Honda, but – to put it extremely – at the same time changing its face more towards assembling than producing cars (in the volume markets and with the exception of the Land Rover branch).

1.3. ROVER AND THE DECLINE OF THE BRITISH CAR INDUSTRY (1968 -1982)

“The Rover brand has been the heart of the British motor industry since 1904” (www.rovergroup.com)Although the roots of Rover can be traced back to the very beginning of the British car industry we will start with our analysis at the end of a long enduring concentration process in this industrial area in 1968 (for further historical aspects see Mair 1998).Until the take-over of Rover by BMW the company represented the last domestic British mass car producer. Its history from 1968 on, when its predecessor, the British Leyland Motor Corporation (BLMC), was forged by various mergers of several smaller producers to reach a critical mass to gain international competitiveness, is a history of dramatic decline both in terms of production and employment (Mair 1994: 274). From 1970 to 1982 when Honda – three years after their decision to cooperation – entered the stage at Rover both production and employment declined by nearly fifty percent (see figure 1). What had gone wrong? The answer is: nearly everything. Firstly, the huge company (the second largest automobile producer outside the U.S., which incorporated 60 manufacturing plants, then satisfying 40% of the British market) failed to implement a coherent product range resp. strategy (Scarbrough 1986: 96). Additionally the company permanently suffered from undercapitalization in spite of its size. Similarily to BMW in the 50s BLMC was for this reason forced to follow a trial and error path of developing new cars.

Secondly, the BLMC system of industrial relations blocked most of the management´s attempts to rationalize production, because of the strong bargaining power of the shop stewards and the

2 Whith respect to the interpretation and explanation of the BMW export-orientation in the past we hold a certain restraint in simply referring to the ‚German export model‘. Holisitic models are second order constructs that represent the typical or average feature of a group of units on a meso- or macro-level (a country region, branch, industry etc.). It therefore can hardly be used to ex post and causally explain the behaviour of an individual company in a specific time period. Rather one has to draw its attention to concrete factors as e.g. product, production, market and country specifics, economic and market policy. Other important factors are the capitalization, time orientation of management philosophies and the constellation of bargaining power inside and outside the company that influences a firm‘s profit strategy and the extent to which it fits with market demands in different countries.

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„highly fragmented nature of collective bargaining within BL – by 1975 there were 246 separate bargaining units and 17 recognized unions in the company.“ (Scarborough 1986: 102) Official and unofficial strikes were quite normal at that time, two weeks without workers laying off their work was an extraordinary experience (Mair 1998: 400).Without major improvements of the production process and being well known for the poor quality of its cars BLMC´s market shares declined and so did the whole market after the oil crisis and recession. After the UK had become member of the European Community other car producers successfully entered the British car market. In 1975 BLMC found itself in such a heavy financial crisis that the government had to take over the company in order to prevent its bankruptcy. In order to lead back the company to success the National Enterprise Board under Ryder developed a ten-years´ plan (Ryder plan) and first of all merged the former separated divisions Austin-Morris and Rover-Triumph-Jaguar. The then following rescue strategy incorporated rationalization, modernization, stabilization of the production process by introducing a new form of labour relations (‚joint management committees‘), the end of under-investment and a consistent new model range (Scarborough 1986; Mair 1998). The management projected a UK market share of 33% and the government therefore planned to invest £900 million, starting with the investement of £200 million at the Longbridge plant where the first new model, the Metro, was to be produced. However, the then renamed British Leyland (BL) ran into a second sales and financial collapse in 1978 followed by a phase of massive cuts of the labour force, plant closures and a shifting of the bargaining power in the industrial relations towards management.3 Until 1982 all production facilities but the Longbridge and Cowley sites had been shut down (Mair 1998: 405pp).

3 The weakening of the unions was undoubtedly supported by the then elected Thatcher government, which introduced several Employment Acts in the 80s (1980, 1982, 1988, 1990, Trade Union Act 1984). These political interferences into the labour relations resricted the possibility of working disputes and the legal privileges of the shop stewards (Cleff: 1997).

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FIG 1. Rover production and employees 1970 -19981.4. THE HONDA-ROVER COOPERATION

After the second financial collapse there was no money available for the development of an own new product, so BL was looking for a partner to provide for an already developed car, at the same time the partner should be ‘small enough’ so that he might not be able to dominate BL (fear of loss of the national sovereignty; Mair 1994: 229). Therefore a co-operation between BL (later renamed in Austin Rover and afterwards in Rover) and the Japanese producer Honda was established in 1979. In 1981 BL started to assemble CKD kits of the Honda Ballade model and sold them under the name Triumph Acclaim, followed by the co-development of the Rover 800/Honda Legend. Furthermore Austin Rover produced the Rover 200 using the Honda Ballad as base which was soon replaced by the new Rovers 200 and 400, based upon the Honda Concerto in 1987. In 1989 a fifth model was jointly introduced, the Rover 600, this time using the Honda Accord as model. According to Mair (1994) the cooperation wasn´t an equal one: except the Rover 800/Legend project, which had been a joint development and production project, Honda clearly dominated the concerted business activities. With Rover assembling Honda cars for the European market Honda could circumvent import restrictions without any FDI and at the same time increase its financial gains by selling CKD kits and supplying parts like engines to Rover. Eventually Honda was able to pose some structural control over Rover especially in terms of quality as now and then it refused to accept some cars produced by Rover due to quality problems. Rover gained some advantage from the cooperation, too. In a retrospective view the survival of the company was secured and several improvements concerning quality, working structures, human resource management, productivity and costs were achieved. In the meantime Rover also changed its owner: British Aerospace bought Rover for overall £192,6 million in 1988 and Honda as well acquired 20% shares of Rover in 1989. During the first years of the co-operation BL still produced a second, self-developed automobile range (Austin Maestro, Metro, Montego) besides the Honda-based Rover-models4 but it soon became clear that the Austin range was another market failure. Thus from 1986 onward the company, now named Rover Group, was restructured and strategically re-orientated. Most of the vertical business activity was split up, the Austin division abolished. Under the new chairman Day the profit strategy was “to develop a range of new Rover models of superior quality and design in the top niche of each size class. Interestingly Day´s stated goal was the creation of a British BMW.” (Mair 1998: 409)

Indeed, a couple of years later Rover and BMW got together as the first was incorporated into the latter. This take-over was accompanied by various other internationalization steps following the leading vision: BMW becoming a global player.

2. THE INTERNATIONALIZATION TAKE-OFF OF BMW IN THE NINETIES

As we have seen, up to 1992 BMW still was a national car producer. This has dramatically changed in the last few years. The first step towards internationalization was marked by the announcement to open a completely new production site in the USA, the most important BMW

4 The two divisions constituted the ‘volume cars’ division named Austin-Rover.

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foreign sales market in 1992 (see figure 4). It was the first German carmaker who decided to establish a new production plant in the Southeast of the USA far away from the traditional automobile regions. One year later the new CEO chief executive officer Bernd Pischetsrieder set up an explicit globalization strategy: "We will built no fully integrated production plant here in Germany anymore and Spartanburg is probably not the last plant that we will establish in a foreign country." (Wirtschaftswoche n° 1+2, 1995, p. 28; translated by the authors). Simoultaneously to the erection of the Spartanburg plant BMW began to both upgrade and integrate its older assembly facility in Rosslyn/South-Africa into the production network. Today it is the first plant to produce both BMW (3-series) and Rover (Land Rover) cars under one roof. Additionally, BMW has launched ‚overseas assembly offensive‘. In uncertain country markets like Egypt, Indonesia, Malaysia, Philippines, Thailand, Vietnam and Russia BMW assembles cars in cooperation with local partners.5 The growing relevance of Southeast Asia for assembly may also indicate its relevance for future production. BMW has already announced interests in opening production sites in this region in the medium-term. With respect to the South-American markets BMW – unlike other companies – acts more cautiously because of the already existing over-capacities there. For meeting import restrictions BMW assembles Rover cars in Brazil since 1998. On the long run BMW wants to produce cars in all its main sales markets (that is in the triade) and open assembly sites in order to gain market access to countries with high import tarifs and local-content conditions. To this end, the company has drawn up a so-called ‘Weltbebauungsplan’ a plan of establishing facilities around the globe. This is to be supported by a dual production strategy: every production facility shall produce both a ‘world automobile’ (a model for all sales markets) and a region specific model (Antrecht 1995). The production philosophy runs as following: each plant is focused on the production of an own specific model, for stabilizing reasons there are additional so-called 'compensative or supplement models' (‘Ausgleichsmodelle’).Finally, it is the BMW and – from 1994 onward the Rover – engine plants that can be seen as the pillars of the international plant network. The Austrian plant in Steyr produces for the US and the South-African plant, too. It is the most important BMW engine plant and, as Bochum (1998) states, together with the UK and Brazilian plants it may be the core of a real globalized engine network. The Brazilian BMW-Chrysler joint venture plant shall provide the Rover plants with small engines. The expansion of the BMW production is supported by various other measures: new R&D subsidiaries were opened in the U.S. and Japan and a new R&D centre was built in Gaydon/Great Britain. Beyond that BMW pushed forward its global purchasing activities under the motto ‘Purchase 2000’ and at the same time reduced the number of suppliers (single sourcing). The purchase offices in Spain, Italy, Great Britain, Australia, Japan, Canada and Mexico were assigned twofold: to the product management and the department for supplier development. Only North-America, Austria and South-Africa still have their own purchasing organization. Internal restructurations also touched the labour relations. BMW started a number of labour-related pilot schemes in 1991, which resulted in a collective agreement (”Betriebsvereinbarung”) called "New Labour Structures" in 1995. The general aim is to increase flexibility, quality and long-term productivity (by 4% per year against 2% under the old system). According to BMW the company tries to go a third way between the Swedish model focussing on employee satisfaction and the Japanese model focussing on productivity increases (Bihl, Thanner, Wächter

5 Land Rovers will be assembled in Thailand and Russia, too.

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1997). Work groups consisting of about eight to fifteen members were introduced. They are entitled to decide about individual and group responsibilities as well as job rotation. For quite a long time BMW has been the frontrunner in disconnecting individual and company working hours, e.g. when introducing the individual 36 hours four-day work week with increased company working hours by about one third. In 1996, a new working time credit account came into force for all production employees. It contains a maximal range of 200 hours for each employee per year and about 10 million hours for the company. In this way BMW wants to balance out seasonal fluctuations of the customer demands and model cycles to assure employment and a constant workforce. The new working time scheme as well as the team work is supplemented by a new remuneration system that gradually replaces the traditional piece wages by a bonus remuneration. Instead of the formerly five wage groups nine are applied today. This new remuneration system is also regarded as an important prerequisite for introducing a common pay structure for blue-collar and white-collar workers in the future.Besides, the internationalization of production is accompanied by a re-orientation of the product strategy. Since the beginning of the nineties BMW has been expanding its product range in order to become a full-line producer. It therefore developed niche models (Z3 and Z 8 roadster, X5 sports-utility-vehicle, to be produced in the US-plant), it purchased Rover (see below) and will take over Rolls Royce in 2003. It has announced to develop at least two new models each year.

3. BMW AND ITS BRITISH ADVENTURE: THE ROVER TAKE-OVER (1994)

With the aim to reach a critical mass for becoming a global player, BMW surprisingly acquired the last, oldest and biggest British automaker, the Rover Group Holdings plc. including Rover Group USA Inc., in 1994. It payed £800 million for the 80 per cent stake that British Aerospace had held in Rover. Honda dissolved its four years of financial engagement with Rover by selling its 20 per cent minority stake. At the same time agreements were made about a further technical cooperation with Rover (BMW annual report 1994).

The take-over of Rover represented a novum in the automotive industry as up to then take-over strategies have been pursued only by mass producers that were buying premium brands (Dolata 1994). In this case a premium producer acquired a generalist company. Therefore the Rover take-over was regarded – and welcomed by the publicity – as both a quantitative and qualitative expansion or internationalization of the BMW company, with the Rover model range providing an entry into the mid-range market without damaging the luxury BMW brand.

3.1. BMW/ ROVER: A COUPLE DRIFTING APART (structural overview)

Today, more than Over half a decade later a structural overview reveals a polarity with BMW being a well selling and technological highly innovative brand and the Rover cars division being the problem child with low selling models; that clearly doesn’t correspond against former expectations and estimations of Rover as a British BMW pendant.

- Product strategy: As mentioned before this deal was thought to be ideal, because it was considered as complementary complementarily supplementing the BMW model range. Yet, the Rover business turned out to be twofold. While on the one hand the Rover cars division has been loosing lost market shares, the sales figures of the Land Rover models have been increasing

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increased (see also Bochum, Wortmann 1998). Contrary to BMW, Rover is mainly located in the middle price mass segment with its Rover 200 and 400 (facelifted and renamed R25 and R45 in 1999/2000) and its then new R75 (the successor of the 600 and 800 series; the former 100 was completely abandoned). It also covers covered niche markets with its famous Land and Range Rovers and the Mini and MGF sports cars. Up to the year 2001 Honda delivered parts and engine etc. for the Rover 200. Despite BMW often being considered as a luxury automotive producer (the BMW 5- and 7-series, Rolls Royce from 2003 onward), the BMW ‘bread-and-butter-car’ ‘bread-and-butter car’, the 3-series, – though in the upper price level – is located in the medium range segment. Fehler! Textmarke nicht definiert.In terms of production volume, employees, sales and operating profit BMW is was the stronger partner with the greater quantities. BMW car production amounted to 755.547 units in 1999, Rover production volume only at 391.873 (see figure 2). From 112.800 overall employees 67% work at BMW (76.000; see figure 3) in 1998.

production BMW/Rover (cars)

0100.000

200.000300.000

400.000500.000

600.000700.000

800.000

1994 1995 1996 1997 1998

source: BMW annual report 1998

BMW Rover

Fig. 2: BMW and Rover car production 1994-1998

employees BMW/Rover

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

1994 1995 1996 1997 1998

source: BMW annual report 1998

BMW Rover

Fig. 3: BMW and Rover employees 1994-1998

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Both tables show that the two companies have been were developing into different directions since the take-over: BMW is was constantly increasing, Rover in total is was declining., both of them were thereby perpetuating their historic trajectory!

- Spatial configuration: In regard to the spatial distribution of the home production facilities of Rover and BMW, they are were similarily situated within homogeneous country regions, Bavaria and the Midlands, representing regional clusters. BMW has four major German plants, in Munich, Dingolfing, Regensburg and Landshut, its three foreign plants are located in Steyr/Austria, Rosslyn/South-Africa and Spartanburg/USA. The four major Rover UK plants are were located in Longbridge, Solihull, Cowley and Swindon. Except its CKD-facilities – mainly for Land Rover assembly – in Malaysia, Kenia, Zimbabwe, Maroc, Turkey, Australia and in Brazil since 1998 Rover maintains maintained no further foreign plants (see table 1).

TABLE 1: The BMW and ROVER plants (incl. production models and workforce)

Plant/Location Country Production range Workforce_____________________________________________________________________BMW Munich Germany 3-Series saloon, compact version 24,699 (1)BMW Dingolfing Germany 3-Series saloon, 5-Series saloon, 19,522

5-Series touring, 7-Series saloon,8-Series coupé

BMW Regensburg Germany 3-Series saloon and coupé, 8,740 (2)touring version and convertible

BMW Berlin Germany BMW Motorcycles 498 (3)BMW Spartanburg USA Z3 + Z8 roadster, Z3 coupé, X5, 2,217BMW Rosslyn South-Africa 3-Series saloon, Land Rover Def. 3,201ROVER Longbridge UK Rover 200, 400, MGF, Mini 12,017ROVER Solihull UK Land Rover Defender, Discovery II, 12,414

Range Rover, FreelanderROVER Oxford UK Rover 75 3,620(+ some further component and engine plants in Austria, Germany, UK and Brazil)_____________________________________________________________________(1) incl. Head Office, BMW Research and Engineering Centre (FIZ)(2) incl. Wackersdorf plant(3) excl. motorcyclesSource: annual report 1998, BMW www.bmw.com, 26.4.1999

- Sales: Not only did the ‚Anglo-Saxon internationalization‘ of BMW, as it may be called, take took place in terms of production enlargement on the British and American ground, but also in terms of its sales markets. The overall car sales figures for Rover are 429.157 (Rover car division: 227.743, Land Rover: 178.000, MG: 11.719, MINI: 11.695), for BMW 751.272 in 1999. Figure 4 shows the major sales markets for BMW and Rover. BMW mainly sells sold its cars in Great Britain and the United States followed by the notably smaller markets of Italy and Japan. These four countries cover 57 % of all foreign markets for BMW. Rover shows showed a different picture, Rover sales saling its cars and Land Rovers mainly and in almost equal shares in western Europe, above all in Italy, France, Spain and since lately in Germany (covering 60%). The home market with 42% (205,200 of 487,700) in 1998 is was more important than it is was

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for BMW with only 33 % (232,500 units). In other words: BMW sales are were to a greater extent internationalized as its export quota lies lay at 67 % compared to that of Rover at 58 %.

The different sales profiles may be explained by the different buyer classes of each brand: mainly lower and middle class buyers in the case of Rover that emphasizes the national home market against a greater share of elite and upper class buyers in the case of BMW that allows for an international sales orientation. The fact of BMW being a foreign owner of a non-German mass producer with its boundness to the British home market creates created an additional challenge BMW has had to deal with: the sociocultural distances distance to the British customers. It may be well comparable to the GM-Opel relation in Germany. It was not at least this challenge that led to a severe Rover sales crisis (see below).

major markets (Rover)

GB GBGB GB GB

(42%)

Germany GermanyGermany Germany

Germany

Japan Japan JapanJapanJapan

Italy Italy ItalyItaly

Italy

FranceFranceFrance

France

France

SpainSpainSpain

Spain

Spain

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

1994 1995 1996 1997 1998

source: various BMW annual reports

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major markets (BMW)

Germany(33%)GermanyGermany

GermanyGermany

GBGBGBGBGB

JapanJapanJapan

JapanJapan

ItalyItalyItaly

ItalyItaly

USAUSA

USA

USA

USA

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

1994 1995 1996 1997 1998

source: various BMW annual reports

Fig. 4 BMW and ROVER major markets from 1994 to 1998

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3.2. THE BREAK OPEN OF THE ROVER CRISIS IN 1999

The structural data of BMW and Rover show an ambiguous picture of the BMW Rover couple with Rover being the somewhat smaller and weaker partner of BMW, but they do not provide qualitative insights into its internal relationship. The stable Rover figures even veil severe underlying problems that even make made the BMW group as a whole change its face. From the trajectory perspective it can be concluded that the perception of Rover being the British BMW alongside with the BMW-Honda connection (figure 5) and the strategic orientation of BMW towards becoming a global player led to a serious underestimation of the problems.

With regard to the Rover management BMW initially acted very cautiously and showed sensitivity for the different sociocultural and national background thus by emphasizing its autonomy and self-responsibility of Rover as an independent sister company. A driving force for that strategy derived from the wish not to mix the two brands BMW and Rover but to demonstrate an independent identity of each. Yet that strategy did not turn out to be successful, in the beginning of 1999 the until then latent Rover crisis broke open for the first time.

In times of crises micropolitics can be seen very clearly. The disputes among the BMW leading managers and board members concerning the future Rover management as well as its product policy reveal the underlying micropolitical dimension that is often so well hidden from the public view.

- Background of the crisis: Since November 1998 continuously slumping sales - esp. of its Rover 200 and 400 cars at the UK home market - have culminated in a severe management crisis. At that time the 1998 figures indicated tremendous losses that amount to 1,9 bn German marks, which reduces the BMW profit by nearly one third (27,5 %, 903 mio German marks). One decisive cause was the exchange rates which had been had falsely estimated by the finance manager; in turn the Rover domestic sales prices became too expensive, thus leading to the collapse of the home market and the necessary Rover investment costs exploding. At the same time, the BMW company made its up to now best profit by increasing it by 24% (3,9 bn German marks; the Rover January-to-April sales figures 1999 in West Europe showed minus 20,6% of its respective sales in 1998, BMW showed a plus 17,9%!) So the BMW group faced an extraordinary polarization of its sales with the Rover cars – LandRover and Mini not included – being the problem child. The 1999 figures even show an intensification of this polarization with Rover increasing its losses to approximately 2,5 bn German marks.

- Micropolitics on the top level: When these continuous losses in sales became evident former controversies and fights concerning the strategic aims of Rover broke open in February 1999. Former decisions as well as the responsible actors were put into question. Already four years before, in 1995, the BMW chairman’s major rival, the development and marketing VP Reitzle wanted Rover to be reduced to its Mini and Land Rover production – thus supplementing the BMW model range with niche cars and not with cars for the low and medium price volume markets. He also wanted one plant to be closed. However, the chairman Pischetsrieder won and Rover went on producing its complete model range. Today BMW managers admit failures in the sense of omitting drastic measures because of fearing to kindle latent ressentiments that BMW managers were experiencing right after the take-over from some Britains.

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Since February 1999 neither VP Reitzle nor the chairman has been in their positions any longer, the chairman Pischetsrieder was ousted, the VP resigned when he didn't get the clear majority in the election for the new chairman. The new and unforeseen CEO of BMW is the former production and engineering VP Prof. Joachim Milberg.

He mainly owes his appointment to the joint vote of the workers' representatives within the BMW supervisory board. According to German participation law, they hold half of the voices in the supervisory board, whereby the vote of the board’s chairman shall be decisive in the event of a tie. Their members, the British and the German workers' representatives, coordinated themselves in a secret meeting in the forefield with the aim to prevent the vice president’s election (Taylor 1999). This is an example how transnationally cooperating workers' representatives are capable of affecting and co-determining the steering of an international company on the highest level – given their legal institutionalization. Not in the least did they decide over the internationalization strategy of BMW, for CEO Milberg will continue his predecessor's strategy of developing successors of the complete Rover model range and following a step-by-step modernization strategy. Dependent on financial and personnel capacity, only one Rover plant after the other was and is to be innovated in its equipment and model to be produced there.

3.3. PUSHING THE ROVER INTEGRATION: FROM A HANDS-OFF TO A HANDS-ON-APPROACH

While holding on to the gradualistic approach the new CEO Milberg also reaches reached for the management and working structures. As it were, he enforces enforced the turn-around by two partial strategies: (A) one aiming at a short-term cost reduction, (B) the other at the integration and standardization of all Rover processes into the BMW goup. Both strategies affect affected and shape shaped the renewal and implementation of a production system (C).

(A) Short-term cost reduction: The Rover turn-around aims aimed at a short-term cost reduction and focuses focused on several cost causing fields as purchase, production (demand for productivity increase), distribution and marketing, R&D, logistics, central functions and personnel. Developing a premium quality will would be decisive, too. The managers of each turn-around field are were supported by a core team that itself reports reported to the lead team.

The turn-around operations are were based on analyses that were had been made in the forefield in the end of 1998 with regard to Rover’s competitive position. The defined turn-around tasks were had been then broken down into teams and measures refering either to organizational units or to functional tasks. The implementation phase is was thought to take about one year and is was supposed to follow a defined time table. A further important measure will be was increased outsourcing of e.g. seats and other components.In order to reduce the cost explosion that had been caused by the high British Pound BMW is also changed currently changing the supplier-accounting-system of Rover to Euro, trying to externalize the exchange rate costs to the local suppliers. The underlying argument – or threat – of the BMW management is was that the British suppliers could lose their contracts to

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competitors located on the European continent which could produce producing the same parts 10-15% cheaper.

(B) Integration and standardization: Since the crisis BMW pursues pursued a strong integration course towards the standardization of all core processes. Internal benchmarking studies have had already attested quite poor figures for the Rover production mainly due to its operation on a low capacity level, a high degree of rework and the existing applied personnel regulations. Accordingly current improvement efforts aim aimed at equipment uptime and the reduction of rework. Restructuration of the BMW directory board, fitting up the Birmingham plant for new launches, face-to-face learning teams, assignation of sister plants, introduction of BMW working structures, transferring the BMW management culture and communication flow, combination of the labour relation systems – these are were the major steps and will be described now.

- Restructuring the BMW directory board: As mentioned above the Rover crisis has had also affected the core structure of the BMW company. Nearly all hitherto independently acting Rover vice presidents had were forced to resign, their successors and area managers had to directly report directly to their respective BMW counterparts. The managment board was changed in its composition of executives, functions and tasks. Only one vice president remained in his position. The formerly autonomous Rover management that held a seat on the board of directors was abolished and the new function – Financial Services and Shares – was added to the existing ones (Development & Purchase, Finances, Distribution & Marketing, Production, Personnel, Economy & Policy). Now all vice presidents are were responsible for every brand of the BMW group. New group functions and tasks shall should prevent their doubling. On the level below the area managers have got get a group-wide responsibility for all structures and processes throughout the line in their respective field. Only in the important production area the plant managers are were directly reporting to the vice president. Concerning distribution and marketing BMW strengthened the brand management against the regional management. A brand or product manager was assigned to each model family.

Thus, the Rover crisis with its integration push leads led to a stronger (re-)centralization and consequently towards the globalization of the BMW group as for the BMW and Rover production activity now are were getting more and more interrelated.

- Fitting up the Birmingham plant for new launches: The oldest Rover production site ‚Longbridge‘ plays played a central role. It is was the biggest British car plant and has been was renamed ‚Birmingham‘. About 10,000 employees produce produced the Rover 25, 45, Mini, MGF, transmissions, pressparts and K-series engines there. Purchase and group marketing, transmission research & engineering center do also exist existed. Beside the new R75 it is was the launch of the new Mini in the end of 2000 that will would play a decisive role for the future success and organization of the Rover cars. As early as 1997 BMW had made the decision on the new Mini model and, what is also very important, to integrate it for the first time in its worldwide distribution network (with the exception of Japan and UK). From that point a pressure for convergence arises arose. The measures taken at the Birmingham factory where the new Mini will be is produced shall should function as an example for the further integration as well as the further replacements of the 25 and 45 Rover cars in 2002. The

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overall objective of the transformation – what up to now at the same time was the is a major difference between the Rover and BMW organization – is was ‘flexibilization’. It referred, what refers to the immense degree of product variability (the new Mini will should be even higher equipped than the Z3 Roadster) and the great ‘changeability’ or ‘reagibility’ with regard to the customers’ wishes. This puts put high pressure on all (development, logistics, production, distribution) processes – like on development, logistics, production, distribution. The existing Birmingham factory which has had been lacking substantial investments for almost 30 years and whose equipment can could be compared to the BMW level dating almost 25 years back shall should get major £2 bn investments, £152 million of which will would be covered by the state. BMW already also announced to build a brand new lean factory for high efficiency production on its Birmingham site and began to rebuild, expand and refurbish the finishing areas for the future Mini assembly. A new press shop and body-in-white-shop are was to be constructed. In essence the new configuration will would be stand-alone-facilities for each model line at the huge factory grounds.

-Face-to-face learning teams: BMW considers considered the transformation as a learning process executed by mixed teams of Rover and BMW employees. Among these teams that operate operated on all organizational levels the launch-teams are were the most important ones at present. They are were mixed teams also in regard of neglecting hierarchical and functional differences between their participants. The program is was focused on the training of individuals who are were thought to impart their knowledge in the future to their colleagues at Rover, thus playing the key role for the future launches by negotiating objectives with the teams and their leaders ('Zielvereinbarungsprozeß'; management-by-objectives; 'target-agreement-process')BMW seems seemed to be aware of existing cultural differences between its own and the Rover employees and workers whose overcoming will take time, lots of communication and training and the building up of personal networks. To this end a BMW shuttle was installed transporting BMW and Rover people by airplane between UK and Germany threetimes a day. It seems obvious that the The Munich headquarter personnel work worked at its limits.

- The sister plant approach: These face-to-face-learning processes as well as the future Rover launches are to should be structurally supported by the sister-plant-approach, what means meant the assignment of BMW to Rover plants (Rover-Birmingham/BMW-Munich, Rover-Oxford/BMW-Regensburg, Rover-Solihull/BMW-Dingolfing). In this course of restructuration new equipment like tools, robots and BMW quality IT-programs are currently were being installed, too. However, the Rover plants’ standardization, integration and innovation process will be was hindered and partially interrupted – at least in its Birmingham factory – by the continuing Rover 25 and 45 production for the next two years. Besides, the fact that the Birmingham plant has had to cope with more launches than its Munich sister plant will lead led to some differences in its human ressource organization.

- Introducing BMW working structures: Overmore, the Rover personnel and labour organization is was under pressure. It is was especially this area that stands stood against integration because of the there prevailing mood of ‘single fighter’ attitude of ‚lone fighters‘, as a manager called it, that had been supported from the former hands-off-strategy of BMW. The most important BMW principles in the personnel area, that shall should be adapted not copied at Rover, are were: individual- and performance-related reward, flexiblization of working time and work attribution

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(Personal-/Arbeitseinsatz), empowernment empowerment approach, combined team and performance orientation, general performance assessment, shifting responsibility to the shop-floor-level. The most urgent needs for change are were seen in the fields of the working time and remuneration. Given an overall guideline which also provides provided a certain scope for adaptations each plant can could install appropriate systems.

From the BMW point of view their its managers are were faced with very new tasks; they cannot could not fall back on the restructuration experiences they had made with their South-African or US-American plants. Those which could had steadily be been built up and expanded. In the Rover case BMW management has for the first time had reduced jobs to a considerable extent for the first time. Up to the end of 1999, BMW had laid off nearly 10.000 employees and enforced the introduction of German working standards like working time credit accounts, working time reduction from 4,5 days/37 hours/week to 4 days/35 hours/week, no more extra-pay for Saturday work and increased the equipment up-time up to 100 hours/week. Job cuttings and working time reduction at Longbridge are were part of the so-called ‘Survival Package’ that has had been drawn up since October 1998. Besides it is was the wage system that will should face changes towards higher differentiation. Only some years ago, in 1994 the Rover management had reduced its overall wage system from six to three grades without interference of BMW.

To increase flexibility indirect employees are were to be transformed into direct production workers. It is was also the standardization of team work, job enrichment and job enlargement structures that are were causing difficulties. One of the greater challenges BMW will would have to cope with is was the installation of job rotation, which had already failed three times at the Birmingham plant in the course of the last seven years. Lots of the BMW personnel programs are were still unknown at Rover, e.g. the Management Associate Program, and the so called DRIVE trainee programme and serveral other services.

- BMW management culture and communication flow: In the course of installing identical German managerial structures ( on four levels -‘Meister’, Process Leader In Assembly, Team Leader, Manufacturing Manager/Area Manager, Technical Director/ Plant Manager), – the current Rover structures being comparable with the Munich ones dating back seven years when the four-level-system was introduced there – a specific management problem has become became obvious at the Birmingham plant, because the Rover structures were outdated. They could be compared with the Munich structures seven years before: Compared to From the German view relationships the communication flow between management and workers on the shop-floor-level is was weak, a middle management hardly exists existed. German BMW workers and managers describe described their perception of the Rover management behaviour as somewhat arrogant (e.g. the predominance of written communication) what leads led to different – and in the Germans' view somehow superficious – extrinsic motivation methods (BMW labels its personnel policy: value-oriented; Bihl 1995). This shall should be altered now, mainly by creating the new Production Leader who can be compared with the German Meister who that represents the basic and major management a central function in the German production area. He or she shall was to control, lead and motivate the workers. by showing interest in each worker's behaviour and performance. Coaching or empowernment orientation might be an appropriate characterization for this. Whether BMW will would have succeeded succeed in equally 'socializing' the respective British men and women with their distinctive

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cultural and hierarchical backgrounds (formerly shift managers, area managers, production groups’ spokesmen) into that very new role cannot be answered. remains to be seen.

All in all, the main differences between BMW and Rover can be found in the field of quality control, the transparency and control of each worker's work and rework (undetailled not detailed job descriptions and job instructions), quality awareness, discoursive verbal problem solving process between of management/Meister and worker in the case of BMW against a written one in the case of Rover, intensive assessment talks, rotation in order to provide flexibility and the workers' representation. As the latter plays a decisive role for the organization and reshaping of working practices some aspects shall be discussed now.

- Combining opposite opposed labour relation systems - 'British adversarial voluntarism meets German co-operative corporatism corporation': Last but not least the ongoing BMW Rover integration process indicates indicated a the perhaps most radical experiment of connecting two totally different industrial and labour relations systems within a company. They can could even be considered as opposite opposed systems in current Europe: ‚British adversarial voluntarism meets German co-operative corporatism corporation‘, as it might be called. Now the four most important British Rover unions, (T&G - Transport and General Workers' Union, AEEU - Amalgamated Engineering and Electrical Union, MSF - Manufacturing, Science, Finance Union, GMB - Britain's General Union) with and their shop stewards whose bargaining power is were unconditionally linked to their workers' support and voice have had to adapt to the legally institutionalized German BMW works council, representing mainly the IG Metall union. The Rover crisis has led to a re-orientation on the shop stewards' side, too. Now the British shop stewards are were facing brand new representation and negotiating structures and cultures that are were based on co-operation ('co-management'), consultation and information.6 The BMW workers‘ representatives don’t did not need to legitimate their negotiations with the management by the workers to that extent the British shop stewards had to. what This provides them a greater independence of action and decision-making. The first occasion that brought the BMW works council and Rover shop stewards into co-operation was the above mentioned survival package. Here for the first time the British representatives got into contact with discussed the German approach towards of working time flexibility to be implemented in favour of keeping jobs.

Last but not least did the crisis lead to a re-orientation in many some shop stewards' heads towards the German works council institution. "It's proving worthwhile, very worthwhile" as one – traditionally ‚isolationalistic‘ – Transport and General Workers' Union shop steward now admits admitted. Concerning the co-operation within the Euro works council the German works councils have had to deal with the fact of an ‘external’ British unionist that were holding a seat in it. Here two different information cultures may could clash as the relatively high information transparency between BMW management and works council, its demand for confidentiality is would only hardly to combine with the intense and direct information flows flow between Rover shop stewards and their workers. On the other hand integrating implementing the works council structure in the Rover representative system is also a difficult question that the biggest T&G

6 The very experience of an discoursive a cooperative management culture seems was to be an experience made by many or most Rover workers and employees at their working places as well. "We have no fear actually about the German management, we would welcome more of having that." (employee at the Longbridge factory)

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union tries tried to solve by installing a kind of dual practice strategy: some representatives were to act in a works council manner and others were to keep on as shop stewards. This should also be a first step to establish and improve the Rover workers’ relations to the very important Munich headquarter which now makes would make all decisive decisions concerning Rover from now on.

(C) Finally we want to turn to the correlation between internationalization and production system of a company. As the production system of a company is the result of the historically grown shop-floor and management traditions and influenced by manifold restructuration attempts and new management approaches at the same time, it is an interesting question how internationalization or globalization introduces new dynamics by adding new foreign sister plants.

In this sense, the German BMW production style may be characterized as based on highly developed skill and technology. Andrew Mair (1994) characterizes Rover as being on a long way of different restructuration attempts since the End of the 60s – most of the time aiming at introducing a fordist-logic against the dominant craft-British model. A view of the internationalization trajectory of both companys now reveals a highly interesting case aspect in the guise shape of Honda! In the past, both companies independently have had got into contact with Honda and its production system, in order to learn from that very company (see Figure 5). Both did it, but with opposite results.

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Japan

UK

Germany

USA

Honda

Honda

Rover

BMW

BMW

Honda

(personnelrecruitment)

(informationexchange)

(jointproduction)

FIG. 5 BMW and Rover and the Honda Input

Rover had had an intensive shared platform production with Honda during the 80s, with Honda holding a stake of 20% at Rover since 1989. Yet, Honda didn't deeply engage in the working and management practices and structures on the shop-floor, despite introducing a new team working structure, kaizen groups and the workers’ uniform. Under the Honda guidance the Longbridge plant made its best-selling cars ever (Acclaim, R8, R400) accompanied by the best payrolls ever given to the Rover workers. As shown on the table Rover had some relations with the US-Honda transplant for an information exchange. The Honda contact taught Rover – as Andrew Mair puts it – "to make cars again" (Mair 1994).

BMW had a more indirect – but nonetheless highly influentional – contact by hiring a remarkable number of managers from a US-Honda transplant for its new Spartanburg subsidiary. One of them became the US-plants first president. BMW then wanted to test the promises of the American-Japanese transplant methods, their lean production approach in an environment that is not imprinted by deeply rooted European-German workforce and its labour institutions. Yet, as far as learn effects are concerned, the main lesson for BMW is: Not the HONDA way, because it turned out to be incompatible with its US-profit strategy of high flexibility and diversity at a low volume and a high quality level. At the very moment, So the initial plant concept is going to was be reconsidered and reliable versant production methods were applied. at the Bavarian BMW plants are strengthened against that Honda philosophy (see Eckardt, Köhler, Pries 2000 forthcoming).

CONCLUSION

Putting together the historic, structural and political information about BMW it leads us to the following interpretation of the BMW group and its internationalization via purchasing the Rover company during the 90s:

The BMW group together with Rover has entered the 21st century with the call of convergence on all levels – its product, production, purchase and sales activities. Its The applied restructuration efforts followed different time frames. On the one hand the BMW managament

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currentformalrelationsship

formerinformalrelationship

pursued a short-term restructuration in the working and production area, on the other hand and at the same time it undertook a long-term restructuration in the product, sales and profit field, the latter representing what at the same time represents the BMW trajectory.

1. With the short-term restructuration, i.e. the integration push, the critical question and issue of compatibility resp. transferability arises arose. What results will would have the new Rover turn-around from Honda to BMW methods, which BMW to a great extent will would firstly have to develop by itself if it wanted to conquer a substantial position within the volume production segment where EOS matter most? Will Would BMW succeed in finding a solution to combine its traditional profit strategy of high flexibility, high diversity and high quality of premium and niche cars – that is was for most of its BMW and the Mini, MG and Land Rover cars as well – and a high volume medium range car production for its BMW 3-series and the Rover cars? At least the attempt to run with two different production models and an autonomous Rover management within the BMW group turned out to be a failure and the startup of the R75 was still accompanied by severe quality problems.

2. The long-term restructuration of the Rover product, sales and profit strategy, i.e. the supplementing of the BMW profile in the small and medium range segments, has had been a continuous strategy since the take-over. The crisis questioned that seriously, yet the new top management holds held on to it. A look at the BMW history shows that this orientation is was partly caused by the BMW trajectory while at the same time it perpetuates has been perpetuating the trajectory. In terms of fact The main pillar of which should be is the creation of a coherent model range comprising three basic models on a high quality level. Like BMW, the modernization of the Rover product range and its market introduction happens should happen step-by-step. As a result the BMW group wants wanted to get a full sortiment producer and offer offered six core models plus niche cars by establishing models in the upper price level of each of all market segments. In the small and medium range segments that very upper price levels first would have to be created by the premium car producer.

Rover therefore is was the „make-or-break-marque“ for the BMW group as a mass producer. Upgrading its small and medium cars and their old-fashioned image towards desirability, quality and reliability is was the essential demand. The first BMW developed Rover R75 plays played a leading role. In addition, the sales strategy of the home-bound Rover cars is about to being should be altered towards world-wide distribution. The R75 and the new Mini are were the first models to be constructed under reconsideration of foreign market specifications and needs.

The problems that arise here are has been timing and ressources. Will Would BMW have the time to let two years pass on until it offers could offer the all deciding models (the R30 which will should be badged 35 and 55) of the small and medium car segment in 2002. The recently facelifted R25 and R45 which are were thought to bridge the time gap show presented both: a step towards a coherent product strategy and - as sales figures have had slightly recovered in the first month of 2000 – perhaps some light at the end of the tunnel. At this point the doubts and concern of Williams, Haslam and Johal (1994) of BMW not being financially strong enough to pay the necessary developments are had not been refuted and must be taken very serious, too. A further hint stressing the financial factor is was also the latest retreat of BMW from its joint venture with Rolls Royce of aircraft turbine production what has had turned out to be a losing business over the view last years.

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Besides the financial and investment factor the long-term and short-term restructuration efforts within the BMW group, i.e. the overall profit strategy, is had to be linked together by micropolitics. This is because image, quality and flexibility – the core elements of the BMW profit strategy – depend first of all on the workers’ commitment to the company and its managers.

3. Switching from an internal to an overall perspective the BMW management must had to take some important external actors and factors into consideration: the state, the European commission, the share-holders and the exchange rates.

As mentioned above, parts of the immense financial investments neccessary for the modernization of the old Rover plant at Longbridge will would be carried out by the Bitish government, but the European Commission is currently has been scrutinizing whether this corresponds with the European competition law. In case of deniance BMW announced that it might close the site and open a new plant in Eastern Europe instead.

Not at least is the importance of that government aid an expression of expressed the disadvantageous exchange rate of the Euro currency to the British Pound. It can hardly be estimated to what actual extent the expensive British Pound has had dramatize aggravated the Rover crisis by forcing up investment and production costs and in turn the price of the Rover cars. Thus, the future development of the currencies will certainly has been strongly influencing influence the chances for the Rover cars division to get a profitable business unit in 2002 again.

Concerning the overall strategic aims of Rover it is was mainly up to the main shareholder, the family Quandt, whose financial engagement has been the pillar of BMW ever since the first crisis. Due to their power it will would be their vote that decides over both the future of BMW and Rover – at a time when ongoing critique forced upon the management by public analysts combined with a high pound and the loss of market shares of Rover cars again attracts attracted competitors to take over the BMW company. The question is was whether the Quandt family will would hold on to their long-term strategy and the coexistence of two car branches under one roof (‚Mehrmarkenstrategie‘). Or will would they force the management to change their politics, e.g. towards closing down or selling the Rover cars division or towards a cooperation with another car producer? The next BMW board meetings in the year 2001will would surely bring some light into this topic.

EPILOGUE

At its meeting (16 th of march 2001) the BMW board decided to break with its by then applied profit and internationalization strategy. It was mainly the family owner and the banks that insisted on selling the Rover division – probably to Alchemy Partners Ltd., a british risk holding fonds in the next few months – and the Land Rover brand to Ford. Only the Mini brand which shall be built in the Oxford plant is to stay within the BMW group. According to BMW all internal restructuration attempts despite being successfull (reduction of stocks of about 60,000 cars, reduction of workers and capacities, quality and productivity improvement and shifting the purchase to the European continent) were absorbed by external developments: the global decline of the demand for Rover cars, its weakness on its home-market, the need to reduce prices by

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about 1.000 UK pound per car in Britain due to the increasing value of the british pound accompagnied by the above mentioned questioning of the state grants.

Concerning the BMW management, this crisis again has had consequences for the BMW top managers. The sales, development and production vice presidents Henrich Heitmann, Wolfgang Ziebart and Carl-Peter Forster that had voted against the decision to part from Rover had to resign. The new profit strategy now go goes ‚BMW is to get a full sortiment producer by its own‘, especially by developing a small 2-Series. Exceptions will should only be two extreme niche models of the extreme now: the Mini and the Rolls Royce.

From a historic point of view, the BMW trajectory must now be completed by adding the Rover crisis at the end of the 90s to the three preceeding crises - in the 50s, when BMW had nearly been taken over by Daimler-Benz, in the 70s during the oil crisis when the public was against the opening of its new Dingolfing plant, and in the beginning of the 90s when the BMW motorcycle production had almost to be closed down.

The surprising solution of the crisis – and the crisis itself – flings open new questions indicating a reconfiguration of the economic and political setting of the automobil industry which affects bargaining structures between workers, managers and share-holders with the latter exerting more and more pressure on the mangement´s activities. Besides, the BMW/Rover case clearly puts into question the management philosophy of internationalization by simply adding another company according the motto ‚big is beautiful‘, which dominated the debate in the 90s.

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