Rover rescue squeezes suppliers

Britain’s automotive component suppliers will have a fight on their hands as BMW’s £3bn rescue package for Rover sparks intense competition from German and other mainland European suppliers, industry experts warned this week. The announcement of BMW’s investment – half of which will be channelled into the ailing Longbridge plant – marks the biggest ever […]

Britain’s automotive component suppliers will have a fight on their hands as BMW’s £3bn rescue package for Rover sparks intense competition from German and other mainland European suppliers, industry experts warned this week.

The announcement of BMW’s investment – half of which will be channelled into the ailing Longbridge plant – marks the biggest ever inward investment into the UK motor industry.

But official claims that it will safeguard 50,000 jobs in the West Midlands – the so-called jobs multiplier – have been questioned, as there is a risk of big contracts going to BMW’s preferred suppliers in Germany.

Analysts believe BMW’s investment is aimed at making it a 2-million-units-a-year manufacturer, to maximise economies of scale. Unified purchasing across the group is expected to follow.

Ian Robertson, an analyst at the Economist Intelligence Unit, said: `After 2002, you can surmise that any purchasing bias will be in favour of BMW’s existing suppliers in Germany.’

Robertson said BMW preferred its own suppliers because of `tried and tested’ quality, as well as a `strong national bias’. The strength of sterling would also harm UK suppliers if it continued, he added.

Professor Garel Rhys, director of Cardiff Business School’s Centre for Automotive Industry Research, said: `Rover is unique in that it only produces in the UK. Its only hedge against a strong currency is to go elsewhere for its components.’

He said BMW planned to source a third of Rover’s components – worth about £1bn – from outside the UK, but predicted that any weakness among UK suppliers would cause that figure to rise. Non-British suppliers will benefit most, he said. `So the jobs multiplier is certainly not 50,000.’

Hours after the announcement on Wednesday, Rover suppliers were upbeat. Brian Yates, managing director of West Midlands presswork supplier Berck, said: `We’ve been competing with these firms for 20 years. We already supply to Germany.’

A report last year found that 700 automotive components suppliers in the West Midlands could lose customers because they could not guarantee quality at sufficiently low cost.

A spokesman for Birmingham and Solihull Training & Enterprise Council, which participated in the report, said this week: `Geography is becoming less important as manufacturers look around the world for suppliers. The warning is still there.’

Investment details, p2; Leader comment, p10