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BMW wins name game
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July 28, 1998: 3:56 p.m. ET
Novel pact lets VW use Rolls-Royce logo 'til 2003; then, BMW gets it
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NEW YORK (CNNfn) - So, what's in a name?
Well, if you're a hapless executive at Volkswagen and the moniker in question is that of the prestigious Rolls-Royce marque, for which VW just coughed up $700 million, the answer is unnervingly simple: Nothing.
In a stunning show of noblesse oblige between rival luxury carmakers, VW, BMW and British aircraft engine maker Rolls-Royce PLC, the previous owner of the Rolls-Royce name, agreed to cede rights to the Rolls logo to BMW beginning in 2003.
After that date, under a novel three-way agreement announced Tuesday, VW will wind up with the Rolls factory and Bentley Motors, Rolls's sister luxury make since the 1930's.
What VW won't get is the marque's name itself: Rolls-Royce. That will become the exclusive property of BMW, which paid just $66 million for the right to use one of the most famous brand names in history
"I would have preferred to keep both brands," Ferdinand Piech, VW's chairman said Wednesday. "But in the way (that) it developed, I am very satisfied."
At a London press conference Friday, Piech admitted defeat in a multi-million dollar battle that boiled down to a name game.
A Pyrrhic victory for VW?
That eight-month skirmish seemed to culminate in early June when shareholders of Vickers PLC, the former parent of Rolls-Royce Motor Cars, threw their overwhelming support behind VW's buyout bid. Vickers earlier had rejected BMW's counteroffer of $340 million.
But VW's apparent victory was a Pyrrhic one. Rolls-Royce PLC, a separate company that makes jet engines and controls the brand name and logo, retained rights to the coveted Rolls-Royce name under a 1973 agreement signed before Vickers took control of the motor cars division.
All along, as tensions mounted, Rolls Royce PLC made it clear it would rather see the carmaker go to BMW, which also happens to be its partner in a jet engine venture.
Analysts said the loss of the logo rights was a devastating blow to VW. But they added the German automaker has a golden opportunity to exploit the Bentley marque, which accounts for 60 percent of total sales at Rolls-Royce Motor Cars.
"Volkswagen is very keen to develop the sort of sporting heritage that Bentley has," Steve Reitman, an analyst with Merrill Lynch, told CNNfn. "We think back to the La Mans triumph in the 24-hour races back in the 20s and 30s."
Under the agreement, VW will have to change the name of Rolls-Royce Motor Cars to Bentley Motor Cars at the end of 2002. That's when BMW's agreement to allow VW free and exclusive use of the Rolls name expires.
BMW, in turn, will have to build a new Rolls-Royce factory to produce a self-styled Rolls, based on its current Silver Seraph model.
-- from staff and wire reports
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