We recently explored the matter of how long it takes to align two ranges of cars when one company takes over another or there is a merger. In the cases of Ford and GM, covered earlier, the process seems to take under a decade. Are there counter examples?
Today I will take a look at the case of Rover, which marque came under the control of BMW in 1994. Rover (when under BL) had already been part of a co-operative venture with Honda.
That process began under the Triumph brand when BL decided to use a slightly modified version of the Ballade as the basis of the Acclaim. The cooperation changed tracks slightly when Triumph was shuttered and Rover began to work collaboratively with Honda, resulting in cars such as the 200/400 (1984) and 800 (1986).
When BMW took over Rover it acquired a brand already in the process of transformation: from BL products to Hondas to more or less Roverised vehicles. In 1994 the Rover range consisted of the 200 (1994, Mk111), the 400 (1990), 600 (1993) and the facelifted 800 (1991) and 800 coupe (1991).
Under the Austin brand (and then none) the Maestro and Montego lingered until 1994 and 1995 respectively. They also had the evergreen but wilting Mini and MGF, launched a year after the deal, in 1995. I will deal with the Rover range here.
BMW’s difficulties in handling the English patient need no further elaboration. BMW approached the management of Rover by trying to remain hands-off and to allow Rover’s engineers to proceed with building up Rover’s identity after the Honda-era and insisting Rover remained a maker of front-drive cars focused on comfort.
Thus Rover did not only pursue a price-differentiation strategy but also one of character: Rovers were to be the best front-drive cars on the market, a kind of qualified competence in the eyes of many. This decision ensured that there would be no merging of the models since the architecture of front-and rear wheel drive cars (seem to) require a fundamental difference to the physical appearance of the cars along with an actual difference to the structure and assembly process.
At the same time as BMW sought to constrain Rover as a cheaper brand, they sold the 3-series compact which sold at a price well within the range of Rover products but it was an entirely different car, with no commonality.
In retrospect it is clear that with the maintenance of a FWD/RWD distinction, a proper merger of model lines would not take place. With that there could not be same economies of scale.
So, four years after BMW’s take-over, the Rover 800 ceased production in 1998. The 200 became the 25 in 1999 and stayed in production to 2005. The Rover 400 stayed in production (after a name change in 1999) to 2005. The 600 stayed in production to 1999. Nothing happened to the MGF other than a refresh in 1999.
BMW’s Rover brought one new model to production: the 75 of 1998, presumably the result of a lurch in design at the time of the take-over in 1994: a four-year gestation where rumour has it (unfounded) Rover’s engineers had to convert 5-series architecture to front-drive configuration. Either way, the 75 had a hurried gestation.
In March 2000, BMW sold Rover to the Phoenix consortium, at least one or two years before it might have begun to replace the 200 and 400 models with properly conceived cars. Phoenix obviously cancelled development programmes and instead roughly facelifted the 25, 45 and 75 as MG variants.
If we take seven years as the typical life-cycle of cars and the normal time-frame of a wholesale model change, then BMW bailed just as that regeneration could have begun to be seen. More importantly, by insisting on Rovers being front-drive they prevented the process of brand synchronization and made life more expensive for the group.
A look at the replacement dates of BMW’s range would show what a more rational brand merger would have looked like, with Rover equivalents of the 3-compact, 3 and 5. I doubt an MG version of the 3 would have made sense and nor would a 95 based on the 7 series.
That alternative model line-up does suggest that Roverised RWD Beemers would have been an odd proposition. How would the models have differed: in styling (artificial Britishness) and what might be called inferior handling characteristics?
The more one thinks about it, the less and less sense BMW’s take-over made sense. It took six years for Munich to realise what a disaster they had brought upon themselves. Ironically, 23 years later, BMW is producing front-wheel drive cars under its own name as it has realized that the BMW name can be extended down-market without apparent problems.
Driven To Write 
I have seen various accounts of exactly what the 75 is or isn’t based on, but my best info (from a top engineer at BMW) is that the 5-Series story is true.
In any case, I basically subscribe to the general contention advanced in CAR circa 1998, that BMW’s biggest mistake with Rover was to remain hands-off for so long. To that you can add a basic lack of due diligence – it seems to me that Pischetsrieder et al got rather too caught up in esoteric ideas of acting as Rover Group’s saviour (one suspects the ancestral familial connections played a degree of havoc with the rational decision-making process here) and fundamentally failed to recognise how gutted the company was. Rover was finished as a serious volume player with the failure of the Maestro and Montego. If BMW genuinely had aspirations to revive them as such (and really, this is the only lens through which the purchase can even vaguely be said to make sense – a mass-market proposition to protect the value of the BMW brand), they needed to be prepared to throw WAY more money at Rover than they did – and, crucially, direct it in what amounted to a dictatorial fashion. To this end, I don’t agree with the implied contention in the article that Rover was on the up-and-up in the mid-1990s. The R3 was an effective-ish redeployment of existing technologies within the Rover Group, but this was really a last throw of the dice – the general assumption before BMW’s purchase was that Rover would be increasingly dependent on Honda in the future, more along the lines of the 600 and 1995 400.
Ultimately, looking at the way Rover was mismanaged throughout the 1990s, I think BMW would have been entirely justified in saying they had zero faith in the competence of Rover’s management to lay out and execute a medium-term plan. Serious companies simply don’t kick a model up a size class near launch because they (think they) can increase the sales margin. I remember wincing – cringing, really – when I read the contemporary guff from Rover high-ups about chasing margins rather than market share. (Incidentally, FCA seems to say that a lot these days, too. Readers may derive their own conclusions.)
With all these things, the monster lurks in the nuances. So, what I meant to imply was that had Rover been able to stabilise their relationship with Honda they’d have been better able to consolidate their brand image and product line.
It is very likely that the hands-off approach was wrong: I mean, I am certain it was. I feel it had a lot to do with a) wanting to see what Rover could do without interference and b) cultural sensibilities. I don’t think BMW wanted to be perceived as invaders. Alas, as you say, Rover’s management were rubbish – even with money they couldn’t conceive of or turn out competitive cars.
The article here showed that after 6 years Rover produced one new car and not much else; BMW would have had to waited another five years before they could have taken more control of management and seen a result.
My personal view is that BMW made three critical mistakes with Rover (if you don’t count buying them in the first place, that is).
1) Awareness of cultural sensibilities, don’t mention the war etc, was reasonable and a prudent position to take. Failing to override catastrophic managerial decisions like pushing the R3 into the Escort class and pricing HH against Mondeos was not. It was blindingly obvious at the time that Rover did not have the cachet its management thought it did, and BMW should have been way more alert to this than they were. The company’s collapse in market share post-1995, in large part because people didn’t think R3 and HH were worth the sort of money Rover was asking, was in many ways the catalyst which unleashed the crisis that led to BMW offloading Rover. I am inclined to include the failure to make the 75 more contemporary in design as another failing of Rover management, but perhaps this was a marginally more defensible decision. Maybe. If I am being charitable, on a good day.
2) It’s well-documented that BMW remained tight with the purse strings for new model development – they funded the 75 as a priority, but everything else in the car division, including the new Mini, was rolling along at a languid pace. Combined with the new mass-market models fading quickly (plus currency shifts, etc), this set up a decided cash crunch at a decidedly inopportune time. I believe BMW should have twigged that the bargain purchase price came with implied big liabilities – that is, full range renewal as soon as possible, meaning a new Mini to replace the 100, the project that eventually surfaced as the R30 to replace the 200 and 400, and R40 emerging as a direct replacement for the 600, rather than a joint replacement for the 600 and 800. The 75 would have benefited from being a more conventionally-sized D-segment contender and I wouldn’t have entertained any notions of replacing the 800 at all.
3) BMW DESPERATELY needed to sort out the problems with the K-Series, managerial sensibilities be damned – it was obvious, even at the time, that Rover was either totally incompetent or indifferent about this issue and that overhead intervention was necessary.
Contrary to popular belief BMW was not that rich a company for a long time. BMW had a long tradition of gambling on business success, starting with the 02, and they were mostly successful. For many years BMW had to take shortcuts themselves, think of the V8 and V12 engines developed for the E23 that were not put to production and replaced by a blown six because of lack of funds.
The complete failure in the market of the Eight and horrendous warranty costs of the early E36 (the combination of both was said to have been the nail in the coffin for Wolfgang Reitzle’s career within BMW) also did nothing for the financial situation.
BMW simply didn’t have the funds to resurrect Rover as a respectable manufacturer in its own right. The big question is why they didn’t see that. Greek Al’s grand nephew instead told the press about resurrecting Riley and creating a new Austin Healey.
BMW funded the development of a fabulous but terminally flawed car in form of the 75. The car looked good and met great admiration when it was presented. But it was dogged by its off putting choice of engines, it was way too expensive for a product from a manufacturer with absolutely no brand image and it was sold through backyard dealers sharing showrooms with Ladas or Subarus.
Had the Hams Hall engine family already been available and had BMW set up a proper dealer network like they later did with the Mini the 75’s fate could have been different.
Maybe Rover simply never stood a chance and should have been let to die.
Aronline debunks the myth:
“The Rover 75 was the first product of the BMW/Rover alliance to hit the market, and was a giant step forward from the Rover 800. However, many people believe that the car’s chassis is based upon the BMW 3 or 5 Series.
This is certainly not the case, and its large transmission tunnel was set-up in order to give the car impressive torsional rigidity. There is no space for a rear differential without significant modification, as MG Rover/Prodrive found during the development of the ZT V8.
The basis of this story lies with the fact that, during the months following the BMW takeover, a concept called ‘Flagship’ was developed, as styled by Richard Woolley. It is Woolley himself who explained the situation: ‘The story originated from the fact ,very early on during BMW ownership, we did look at ‘re-cycling’ the then outgoing E34-generation 5 Series platform for Flagship.
BMW was about to launch the E39, and all the tooling for the old model’s underpinnings were theoretically available, sourced from the South African BMW plant. It was an idea that BMW suggested we investigate.’ This large car (a kind of latter-day P5) would have sat on a modified BMW 5 Series platform, but was cancelled shortly after the styling proposal was completed.”
http://www.aronline.co.uk/facts-and-figures/features-old-wives-tales/
Hi:
Thanks for that. We can see where precisely it went wrong for Rover.
I’m aware of Woolley’s comments on the subject of the 75 floorplan. I’ve balanced them against my source at BMW, who is sufficiently high-up to know the ins and outs, and also the source who handed over the ‘Freelander Files’ to CAR, who was clearly a very well-connected insider at Rover (borne out by subsequent events to that scoop) and explicit that the 75 floorplan was loosely based on the E34 5. It’s true that MGR had to substantially re-engineer the chassis for the rear-drive 75s. This is because the floorplan was already originally heavily redesigned for the 75 – so in a meaningful sense, this entire debate is largely moot. But I mention it for the sake of the historical record.
Thinking back to the previous article on this subject, Ford and GM Europe are really special cases. In combining European products and operations, they were ‘only’ streamlining product lines within existing brands, ultimately under the control of their parent company. I’m not underestimating the size of that task, and I also know that I’m simplifying things – there is the issue of US ownership, etc.
Other cases, on the other hand, involve something much more difficult – merging two or more genuinely separate businesses, with completely separate cultures, technologies and organisations. I’ve come to the conclusion that if you’re going to do that, you have to have very good reasons for doing so (arguments about economies of scale, ‘synergies’, etc, only go so far) and be prepared to be ruthless and destroy anything which duplicates effort, or doesn’t make sense to your customers / fit with what you want the new business to be. It may even involve constructing a whole new business. “Two turkeys don’t make an eagle”, as the old saying has it.
As has been said, you also need to be able to invest large amounts of money over a long period. BL/ARG/Rover failed at all of the above, as did Rootes/Chrysler/Talbot. PSA’s solution to the latter problem was straightforward. I hope it works out better this time around.
Turning to Rover and BMW, Rover’s owners before BMW bought them were desperate to offload them and I guess that BMW thought that they were getting a good deal (due diligence only goes so far, I suppose). I think it’s clear that they really had no intention of integrating the two businesses. Ultimately, if Rover failed, they could cherry-pick the best bits, which they did.
No doubt a PhD has been written on this. Might I suggest that Ford’s merger of the UK and German divisions was probably as hard as merging two separate brands – quite likely there were two different cultures only nominally serving the same end.
BMW deliberately took a hands-off aproach to Rover because they knew about cultural differences and whatever they did, they didn’t mention the war.
What they did not take into account was the fact that Rover’s engineers over time had lost the ability to design a complete car from scratch. BMW found out about that very late and then took a very military approach at finishing the 75. They also found that Rover engineers had a different opinion on quality or attention to detail. As an example the original design of the 75’s sunroof was meant to have a visible panel gap in the roof from the sunroof opening’s corners to the B-post, something unthinkable in the BMW world. As a result, the complete roof panel had to be redesigned at considerable cost.
The 75 also suffered from its lack of acceptable engines. Nobody would have touched a K-four engined 75 with a barge pole because this engine’s failings were quite well known. The six cylinders were thirsty and lacked power, the 75 was frighteningly expensive and on the Continent was sold through backyard dealers.
What could be learned was that in order to compete with the German top three you either do it properly or you don’t do it at all.
Just as Jaguar found out with the X-type and as Alfa is currently finding out with the Nuova Giulia.
I do hope that Carlos Tavares and Michael Lohscheller have Carver, Seale, and Youngson’s “When Rover met Honda” on their reading list. It’s a patchy work, with some surprising factual errors, but it covers the ground well.
My between-the-lines reading was that Honda’s involvement always had profit as its primary objective.
The Acclaim arrangement was the most “commercial”. At the end, with the EU “gentlemen’s agreement” expired and production underway at Swindon, Honda were at their most altruistic, lending Rover an engineering team to “lay the keel” of the R3 200, with no immediately evident benefit to themselves.
Every joint venture car was different in the way that the two companies interacted. The XX Rover 800 was an object lesson in “how not to do it”, the 600/Synchro was the most perfect example of co-operation, but not a big sales success – it’s said that Honda put a limit on the number of cars Rover could make.
A takeover is a different matter from a joint venture, but Opel’s previous experience with non-GM manufacturers is encouraging. The Trafic / Vivaro is their Acclaim. The pre-merger Crossland X is more of an HH/R8 (1990-95 Rover 200/400/Concerto) than a Rover 800 / Leg End.
The world now is very different from the late ’70s when Michael Edwardes brokered the Acclaim deal with Honda as a short term expedient. I’d imagine Tavares’ ambition is to emulate Ghosn and Piëch, rather than Edwardes, Musgrove, and Day.
There’s much fascinating detail in these comments; the “old wive’s tale” hasn’t quite died either.
Being a person interested in underlying patterns/laws, I’m interested in what point should one consider a take-over. Is it right when the range is freshest or about two years or three years before (mid-way)? And why is 7 years the average model life cycle anyway? Why not five or ten? This number matters because it dictates the rhythm of a car company.
I’ll take the Ford take over of Volvo as a very good counter point. Volvo had the engineering talent and resources to develop models in their own, it just wasn’t competitive doing it alone. First they wanted to hook up with Renault, when that deal was vetoed by its own shareholders, they put the entire car making business up for sale. To this days Volvo Trucks has been extremely profitable, and it seems it has always been the truck making side that has been holding up the car making business for Volvo as well as for Saab/Scania, Leyland/BMC, and so on.
When Ford took over Volvo Cars, Volvo had already spent about 3 billion euro in developing the modular P2 platform, the S8o had just been introduced, and with the S60, V70, and XC90 in the pipeline. Ford didn’t have to do much but oversee the cars being productionalized. And the P2 platform went on with a very long life within the Ford company, underpinning practically every car larger than the Fusion that wasn’t a truck, there are parts of it still used to this day. The S/V40 was developed in conjunction with the Focus and the ST220 got Volvos transverse inline five as it’s top offering.
I can’t see Ford doing anything wrong as custodian of the Volvo brand, the problems layed in the fact the entire PAG group was underfunded. To this day, I don’t see anything wrong with that portfolio, it was a very good portfolio of brands. Volvo, Jaguar, Land Rover, and Aston Martin, that’s a pretty good deal. And with Lincoln thrown in as good measure. The market value of those brands alone may be bigger than the Ford company itself these days. The only problem was that Ford was under cashed, and that it was draining its resources. Volvo should’ve needed more investments to continue to be a long term asset for the company.