BMW profits fall 27% as Rover troubles hit

THE INDEPENDENT
Michael Harrison Business Editor

THE GERMAN carmaker BMW yesterday reported a 27 per cent fall in first half profits, blaming the decline on a marked deterioration in the performance of its Rover cars subsidiary. BMW said the fall in net income to 191m euros (pounds 128m) was due principally to the phasing out of the Rover 600 and 800 series and a "dramatic decline" in UK car prices.

Rover car sales fell by 33 per cent to 114,364 in the first six months of this year, However, sales of Land Rover, Range Rover and Discovery and Freelander models rose 27 per cent to just under 91,000. The German parent company's results were further affected by the accelerated redundancy programme at Rover which saw 6,500 employees leave the group between January and June, reducing the workforce to just over 31,000.

However, BMW said it expected the restructuring programme at Rover, together with the launch last month of the flagship Rover 75 model, to lead to a significant improvement in the second half of the year. Rover car production fell by a half from 173,376 in the first six months of 1998 to 87,459 in the same period this year, while Land Rover output was down 7 per cent.

But production of the Rover 75 at the Cowley works in Oxford is scheduled to rise from 1,800 cars a week now to 2,800 a week by the end of the year. A spokesman said that orders for the Rover 75 now stood at 11,000 with a 10-12 week waiting list in Germany and an eight-week wait in Britain.

Last month BMW announced that it intended to invest pounds 3.3bn in Rover over the next six years with the aim of doubling production in the longer term to 1 million cars a year. Sales of BMW branded cars rose 13 per cent in the first six months to 387,000, driven by strong demand for the 3-series while total group revenues rose by 3 per cent to 16.35bn euros.