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Ford to Buy Land Rover From BMW

Automobiles: SUV unit's North American headquarters will move to O.C., bolstering Southland's reputation as 'Motown West.'

March 17, 2000|EDMUND SANDERS and MARJORIE MILLER | TIMES STAFF WRITERS

Ford Motor Co. will announce today that it has agreed to buy the prestigious Land Rover sport-utility unit from Germany's BMW Group for $2.8 billion and plans to relocate the division's North American headquarters to Orange County.

The deal is a further nod to Southern California's fast-emerging reputation as a hub for luxury automobile makers and gives Ford another coveted nameplate to add to its portfolio of world-recognized luxury brands, consisting of Lincoln, Jaguar, Volvo and Aston Martin.

"It is our intention to leverage Land Rover to the fullest potential," Ford Chief Executive Jac Nasser said.

Ford officials said they plan to consolidate Land Rover with its other luxury lines in Irvine, where it moved its Lincoln-Mercury headquarters in 1998 to take advantage of California's car culture and design expertise.

Land Rover would become the 18th auto company to base its world or North American headquarters in Southern California, which industry analysts have dubbed Motown West.

Ford, based in Dearborn, Mich., also plans to expand the product line of the Land Rover, which is known in the U.S. for its boxy, jeep-like Discoverys and its pricey, amenity-filled Range Rovers.

The company would not say how many jobs might move to Irvine after the sale closes. Land Rover's current North American headquarters in Lanham, Md., employs about 60 and has relocated about 40 others in the last year to BMW's U.S. base in New Jersey.

Last month, Ford said it would move 225 jobs to Orange County as part of the relocation of its North American luxury lines, called the Premier Automotive Group, from New Jersey.

Analysts said the Land Rover purchase would provide momentum to Ford's recent push into sport utility vehicles and should broaden the company's European presence.

"It's a real coup for Ford," said Jim Hossack of AutoPacific Inc., a Tustin consulting firm. "It will give them a muscle and cachet in the sport-utility market that they might not otherwise have had."

Land Rover sold 177,000 vehicles last year, including 30,000 in the U.S. The company employs 12,000 worldwide, primarily at its manufacturing plant in Solihull, England.

Ford expects to close the deal in the third quarter.

The decision by BMW to sell Land Rover, considered the crown jewel of the otherwise troubled Rover Group, reflects the German manufacturer's desire to cut its losses after a disastrous 1994 purchase of the British car company.

Separately Thursday, BMW said it is selling the bulk of the Rover Group's passenger car operations to British venture capital firm Alchemy Partners.

Munich-based BMW said it will keep the new Mini, which is due to be launched at the end of the year, but is giving up on the rest of the car line after Rover lost more than $1.3 billion last year--26% more than in 1998.

"What this tells us is there has been a major rethink in strategy at BMW," said John Lawson, an automotive analyst at Salomon Smith Barney. "The Rover brand, they discovered, really was a bankrupt brand, and they walked away from it."

Rover has had three owners in the last 10 years. BMW bought it for $1.2 billion in 1994, mainly to gain access to Land Rover's four-wheel-drive lines: Range Rover, Discovery, Defender and Freelander. The latter two are not sold in the United States.

The German firm subsequently spent as much as $5 billion more on the company while watching car sales drop annually, according to Willi Diez at the Institut fuer Automobilwirtschaft in Nuertingen, Germany.

The car company was dubbed "The English Patient" as it continued to suck up investment and lose money. Rover sold 251,000 cars last year, including the Mini and Land Rover lines.

By contrast, the Land Rover operation has been profitable in recent years, analysts said. The unit reported nearly $1 billion in U.S. sales last year.

Alchemy Partners said its new business would be called the MG Car Company and will produce the Rover 25, Rover 45 and the MGF sports car at the aging Longbridge plant in Birmingham, England. The facility employs about 9,000 people.

Industry analysts, noting a 20% overcapacity in European auto production, were skeptical that investors with no experience in the automobile industry could prevail where the experienced BMW had failed.

"Maybe they can run a smaller-scale operation more efficiently. I think it is going to be really tough for them," said Gregory Melich, an analyst for Morgan Stanley Dean Witter investment bank. "The whole Rover experience has been bad for BMW. They've lost billions."

Times staff writer Edmund Sanders reported from Orange County, and staff writer Marjorie Miller reported from London. Christian Retzlaff in The Times' Berlin bureau contributed to this report.

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