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4.37 pm

The Secretary of State for Trade and Industry (Mr. Stephen Byers): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:


This has been a very important day for Rover and for the Government's relationships with major multinational companies such as BMW. I want to report to the House on the decisions that the supervisory board of BMW has taken today, and I want to explain the circumstances surrounding our offer of grant aid in June of last year.

First, it is important to inform the House of the decisions that have been taken by the BMW supervisory board today. I also want to share with the House some additional information that I have received from Professor Milberg, the chairman of BMW, following the supervisory board meeting that was held earlier today.

The supervisory board has decided that production of the new Mini, which originally was to be based at the Longbridge site, will go ahead but will be developed at the Cowley plant in Oxford. The new Mini will be launched, as originally planned, in the early summer of 2001. Production of the Rover 75 will continue at the Cowley plant in Oxford, but it will be produced on behalf of Alchemy Partners, the new company to which BMW has decided to dispose the Rover and MG brands. Sales and distribution of the car will also be handled by Alchemy Partners.

The body pressing facility at Swindon will be retained as part of BMW. The Hams Hall engine facility in Birmingham, which is a very important project, will be completed and will enter operation as planned, as part of BMW.

Today's major announcement affects the future of the Longbridge plant in Birmingham. BMW's decision to dispose of the Rover and MG brands to Alchemy Partners will have clear implications for Longbridge. I have spoken today with Jon Moulton, one of the new owner's principal directors. I pointed out the importance of Longbridge and the belief of many people that it has a viable long-term future as a car production facility. I stressed the importance of Longbridge and the way in which the work force have responded over some months to changed circumstances by improving productivity and raising skills. I stressed the plant's strategic importance for Birmingham and the west midlands as a whole.

Mr. John M. Taylor (Solihull): I thank the Secretary of State for recognising the great importance of Longbridge, but he has not yet mentioned the destiny of

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Land Rover, which is in my constituency. Will the Secretary of State comment on rumours currently circulating that it will be sold to Ford Motor Company?

Mr. Byers: I shall when I come to the discussions that I had with Professor Milberg after the supervisory board meeting. He specifically addressed Land Rover's position, and I hope to answer the hon. Gentleman's point a little later.

On Longbridge, Mr. Moulton said that he wanted to retain car production, and that Alchemy Partners was not in the business of asset stripping. He said that the company intended to develop the MG brand at Longbridge. Clearly, however, many questions remain to be answered for the people who work at Longbridge and for the whole west midlands. I shall meet Mr. Moulton later today to discuss further Alchemy's detailed intentions. I shall stress both the important part that Longbridge can play and that car production should be retained. I hope that Alchemy Partners will recognise its responsibility as the new owners of Longbridge to a work force who have been flexible, who have improved productivity and who believe, as the Government and I do, that Longbridge has a viable long-term future.

Mr. Redwood: Does the Secretary of State agree that his mishandling of the whole regional aid map discussions with Brussels has left him powerless to intervene and caused endless delay? Does that not show that the warranty he offered to Rover workers was time-expired on the day that he gave it? He must have known that he had filed an illegal map and that there would be endless delay. When will he sit down with the Commission to reach agreement?

Mr. Byers: The right hon. Gentleman tries to divert us to an issue not related to BMW's announcement today. I spoke to Professor Milberg yesterday, asking whether, given the difficulties faced by BMW--a loss of £740 million this year on top of the loss in 1998 of £550 million--our grant of £152 million over five years would make a great difference. He said that in the context of the difficult decisions that BMW had to take today, the grant was not an issue. Opposition Members may want to make an issue of that, but it is a red herring. [Interruption.] I shall come on to grant aid shortly.

The right hon. Gentleman likes to say that he understands business. He should realise that losses of £1.3 billion over two years are far more significant than a grant of £152 million over five years.

Mr. Redwood: At the time the Secretary of State tried to negotiate grant aid, he and his colleagues thought that it was important; so did BMW, and so did the people of the west midlands. We knew that we could lose the whole transaction because of the delays created by the Secretary of State. Is he saying that he will not bother to sort out his row with Brussels, and that if a future owner of any part of our motor industry wants aid he will not care less and none will be available?

Mr. Byers: The right hon. Gentleman cannot resist talking about rows with Brussels. They are the entire raison d'etre of his political life. [Hon. Members: "Answer seriously."] It was not a serious question.

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The issues surrounding the grant did not affect the decision taken today by the BMW supervisory board. The House is concerned with the consequences of that decision. We have had discussions today with Alchemy, and during my discussion with the new owner this evening I will ask whether the grant is significant as far as it is concerned. The situation is clear. The grant related to a deal struck with BMW for investment at Longbridge. If that investment does not go ahead, the grant will go by default.

Mr. John Butterfill (Bournemouth, West): When the Secretary of State met the director from Alchemy earlier, did he ask how Alchemy imagines it may be able to cope with losses of the scale that have been sustained by Rover? If he did not, will he discuss that point with the director later?

Mr. Byers: I spoke to Jon Moulton earlier, and will meet him later. I shall wish to raise that point with Mr. Moulton. We do not want the new owner to give false hopes to those who work at Longbridge if it will be unable to develop a viable car production facility there.

The hon. Member for Solihull (Mr. Taylor) made an important point about the direct effects on his constituents. Land Rover has been a highly successful car production facility in Solihull, and BMW is seeking an alternative owner. Land Rover will be a desirable car production facility, and other car manufacturers will be interested in acquiring it. Professor Milberg did not mention any particular company when I spoke with him about an hour and a half ago, and there is some speculation about who the new owner might be. We shall discuss this whole matter with a number of manufacturers over the coming hours and days. That will clearly include any particular interest in Land Rover.

Mr. John M. Taylor: I am grateful to the Secretary of State, but he has given me a certain sense of deja vu. When I first came to the House, I was involved in stopping the sale of Land Rover to General Motors. I shall have to look out my papers, as we seem to be in the same position all over again.

Mr. Byers: I hope that, whatever happens, people will realise that Land Rover is an excellent facility, manufacturing a product that is profitable and desirable. As Secretary of State, I intend to make that case.

The events that occurred at the supervisory board today are a great disappointment to the Government. We had an understanding--an agreement--with BMW, to which the work force had signed up. It was that there would be changes in working practices, that productivity would be improved, and that investment would be made--especially in the Longbridge facility. BMW accepted that, until 2002, a loss would be incurred by the Rover group in the UK, but that it could live with that. The company intended to break even by 2002.

Today's decision by BMW goes against the understanding that was reached last year.

Mr. Michael Jack (Fylde): Towards the end of last year, in some of the more authoritative parts of the British automotive press, stories were circulating that BMW had lost interest in Rover and had been in discussions with

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Volkswagen about carving up the various plants. Was the Secretary of State aware of those reports? If he was advised of them by his officials, what action did he take to check them out with BMW to find out whether the company was already preparing an exit strategy?


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