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BMW Takes on British Connection : Automobiles: The German company has signed deals with Rover and Rolls-Royce.

February 07, 1994|From Associated Press

BERLIN — BMW, synonymous with German industrial quality and craftsmanship, is acquiring a British taste.

The auto maker known for status cars made news this past week with the purchase of Britain's Rover, the formerly state-owned maker of four-wheel drive vehicles.

Less publicized, however, is BMW's other move into the British business world: a joint venture with Rolls-Royce--the jet engine maker, not the luxury car manufacturer.

That deal, signed in 1990, returned BMW to its original business of making aircraft engines. BMW and Rolls-Royce are each investing $570 million for a factory near Berlin to make jet engines.

Already they have orders totaling $850 million from Gulfstream of Savannah, Ga., and Bombardier Inc. of Montreal.

The BMW trademark, a circle with blue and white quadrants, represents an airplane propeller. It reflects what the Bayerische Motoren Werke made in 1916 under one of its founders, Gustav Otto, son of the developer of the four-stroke engine.

After World War I, the Munich-based company had to retreat to making only railroad brakes for several years because of treaty restrictions, and World War II left its auto and aircraft engine plants in ruins.

Despite the setbacks, BMW has clawed its way up the global auto industry with farsighted management. The purchase of Rover cars roughly doubled BMW's share of the European auto market, disrupting the Europe strategy of Japan's Honda Motor Co.

Honda holds 20% of the Rover car-making subsidiary and, after 15 years of raising Rover quality, suddenly finds itself in an ungainly partnership with competitor BMW.

BMW, which is building a plant in Greer, S.C., to produce sporty two-seaters, is the only German car maker to make money in 1993. It is paying British Aerospace $1.2 billion for Rover from ample cash reserves.

The combination will intensify competition in Europe, said analyst Hans Hartmann of the research arm of Dresdner Bank, which is BMW's house bank.

"Both BMW and Rover will want to export more intensively into the European market," he said.

BMW will be able to add the four-wheel-drive Range Rover to its extensive distribution network in the United States, where BMW posted a sales gain in 1993 that helped offset the dismal German market.

While the German auto industry overall registered a 23% fall in production to 3.75 million vehicles last year, BMW kept its production drop to 9.2%, making 534,000 autos worldwide.

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