Government aid package secures future of Rover plant

At the end of March 1999, agreement was announced between BMW, the German-owned motor manufacturer, and the UK government on a financial aid package which ensures that the new Rover medium-sized car will be produced at the Longbridge plant near Birmingham. This move followed an earlier agreement on flexible working arrangements at Rover and ended months of uncertainty over the future of Longbridge.

In December 1998, employees at the Rover car manufacturing group voted to accept a package of 2,500 job losses and more flexible working hours, negotiated between management and trade union officials to secure future investment in the Longbridge plant, near Birmingham, by Rover's parent company, the German-owned BMW (UK9812168N). However, while the conclusion of the agreement secured GBP 400 million of investment in the production of the new Mini model at Longbridge, there followed more than three months of uncertainty over whether the wider investment needed to ensure the future of the Longbridge plant would in fact be made. BMW applied to the UK government for between GBP 150 million and GBP 200 million in aid towards an overall GBP 1.7 billion investment at Longbridge for the production of a new medium-sized model to replace Rover's 200 and 400 series.

During the course of the negotiations between BMW and the UK's Department of Trade and Industry, BMW announced that Rover had made a loss of almost GBP 650 million in 1998, compared with a loss of GBP 91 million in 1997. BMW said that the sharp rise in Rover's losses was the result of "model changes, market and currency factors and restructuring measures". BMW management also disclosed that it was exploring the possibility of building the projected new medium-sized car in Hungary as an alternative to investing in Longbridge.

Agreement between BMW and the UK government was finally reached on 31 March and announced in parliament by the Prime Minister, Tony Blair. Full details of the package, reported to involve GBP 180 million of state aid, have yet to be released, pending approval by BMW's managing and supervisory boards and the EU authorities, but it now seems clear that the replacement for the Rover 200 and 400 series will be built at Longbridge. According to UK trade and industry secretary, Stephen Byers, the deal will secure a total of 50,000 to 60,000 jobs both at Rover and in the supply chain in the West Midlands and the UK more generally. However, he said that the deal was concerned not only with the preservation of jobs but also with increasing productivity and improving the skills of the workforce.

In a joint statement, Mr Byers and Professor Joachim Milberg, chair of BMW, said: "We both look forward to Longbridge becoming a world-class plant for the next century, and one that will achieve the highest standards of working practices and productivity."

Union leaders appear to accept that, even with the new investment, there will be considerable further job losses at Rover, over and above the 2,500 envisaged at the time of the December 1998 agreement. It is also expected that further changes in working methods, geared to maximising employee flexibility, will be sought by the company.