A productive deal for Rover, but jobs remain uncertain

He drives a hard bargain, that Stephen Byers – getting those slackers at BMW to agree to set tough productivity growth targets for their new investment at Longbridge before he agreed to hand out £129m of regional selective assistance. Well, that’s how the secretary of state at the Department of Trade and Industry dressed it […]

He drives a hard bargain, that Stephen Byers – getting those slackers at BMW to agree to set tough productivity growth targets for their new investment at Longbridge before he agreed to hand out £129m of regional selective assistance. Well, that’s how the secretary of state at the Department of Trade and Industry dressed it up this week, presenting the grant as the result of hard-nosed negotiations that wrung promises out of the German car company to boost productivity at its loss-making UK subsidiary.

So far, so unconvincing. The fact that BMW has spent the past two years bemoaning the Rover plant’s low productivity, and is now committed to spending hundreds of millions of pounds to re-invent the site as a world-class car plant, makes the notion of a `strings-attached’ grant seem improbable. The fact is, BMW threatened to take its investment to Hungary and the Government has stepped in to negotiate terms that will keep the car maker in Britain, protecting tens of thousands of West Midlands jobs.

There are provisions in the aid package for cash to be withheld, or for BMW to be forced to pay it back, if productivity targets are not met. This is an unlikely scenario, but it will make for a tense transition stage. The jobs outlook at Longbridge is uncertain. When the new plant is eventually running at full capacity it will employ 9,000 – the number now at Longbridge. But until then, employment will depend on sales of the 200 and 400 series cars. If these remain sluggish, jobs at Longbridge will go.

So Byers’ claim to have tied Government aid to productivity gains may be smarter than it looks, pre-empting the potential embarrassment of state aid being followed by job cuts. If BMW banks the first installment of cash and then lays off Rover workers, it will all be in the name of Government-backed productivity gains.

You can’t argue with that, can you?