Europe tries to veto Longbridge investment plan

Doubt was cast over the future of Rover’s Longbridge plant again this week when European competition commissioner Karel van Miert threatened to block UK state aid for BMW’s proposed £1.7bn redevelopment of the plant. He is reported to be seeking detailed evidence from BMW that without the aid there is a real threat that production […]

Doubt was cast over the future of Rover’s Longbridge plant again this week when European competition commissioner Karel van Miert threatened to block UK state aid for BMW’s proposed £1.7bn redevelopment of the plant.

He is reported to be seeking detailed evidence from BMW that without the aid there is a real threat that production would be moved to Hungary.

BMW said it had not yet been contacted by van Miert. But one Rover insider claimed that `a full review of both alternatives showed the very marginal nature of the decision. There was a lot of enthusiasm from the Hungarian government.’

BMW considered Hungary `a very serious alternative proposition’ to Longbridge for building Rover’s new medium-sized model, he added.

It is unclear whether BMW made an official approach to the Hungarian government for aid, but the Hungarian plant could have been viable without it. Labour rates are relatively low among Hungary’s skilled workforce.

The deal with the UK government is expected to be agreed by the BMW board in the next few weeks. It will then be referred officially to the European competition authorities for scrutiny.