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BMW may shrink Rover
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October 15, 1999: 9:56 a.m. ET
U.K. automaker refuses to rule out sale of non-core assets by its German parent
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LONDON (CNNfn) - British car maker Rover refused Friday to rule out the possibility that its German parent BMW may sell the non-core assets of its struggling U.K. subsidiary as part of a re-examination of the unit.
The BMW board met Friday to discuss a further restructuring program at Rover, which could include the sale of its tooling and pressing plants, according to the Financial Times.
A Rover spokesman told CNNfn.com he had "no comment" on the report and added that the "business was always under review." He pointed out that the idea of non-core asset disposal was first raised "about a year ago."
But he denied part of the report that said the review signaled the start of a much closer quarterly examination of the U.K. subsidiary. "That is a misunderstanding of the nature of our relationship with our parent," the spokesman said. "We are totally integrated at all levels so there is a constant stream of information."
BMW management also plans to discuss the political and financial fallout from its insistence, disclosed last week, that its major U.K.-based suppliers bill in euros, the Financial Times said.
Rover confirmed it is talking to its top 80 suppliers about having all new business quoted in euros, and that it would be seeking to renegotiate existing contracts.
But the automaker refused to confirm it had told component makers it wants to fix the exchange rate of the British pound at between 2.60-2.70 German marks ($1.43-$1.49) versus a current exchange rate of around 3 German marks.
"The exchange rate will be a question of commercial discussions with each supplier," the spokesman said.
Suppliers are reportedly outraged at the exchange rate demanded, which is equal to a devaluation of up to 13 percent. This comes on top of demands for a 10 percent cost reduction at the start of this year.
"The general consensus in the auto industry is that the pound is about 10 percent overvalued," one industry insider told CNNfn.com
Suppliers also have complained that they bid for the Rover business this year on the basis of a 600,000-unit production run, not the 497,000 run now expected, the paper said.
The fallout could prove damaging to the British government, which approved $242 million in state aid to Rover last June in a bid to keep the company's car production in the United Kingdom. 
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BMW
Rover Group
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