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Mr. Byers: My Department and I have close links with BMW and have been in dialogue with the company about many issues. Over the past few days, it has become clear that a small number of BMW's directors have adopted a new business strategy--that was revealed today.

The business strategy towards which BMW was working was the one that was agreed during last year: to retain Rover--in its totality--in the UK, and to invest in areas such as Longbridge in the future. As a result of the escalating losses incurred by BMW, which today declared losses of about £140 million last year, the company felt that in order to protect its total viability, radical decisions had to be taken. We are seeing the effect of those today.

Several hon. Members rose--

Mr. Byers: I cannot give way because I need to make some progress. The hon. Member for Tiverton and Honiton (Mrs. Browning) raised some important issues about grant aid that I want to address. It will take me a little time to do so and I want to enable many hon. Members to take part in the debate.

Since 1994, BMW has made a significant investment in Rover. At Solihull, new lines have been developed for Land Rover's Freelander and Discovery models. BMW has put £400 million into a new line at Cowley, incorporating state-of-the-art technology and new working practices. That has enabled the introduction of the Rover 75. The new engine facility at Hams Hall has received an investment of £400 million to produce engines for Rover and BMW.

Changes have been introduced, and a large investment has been made by BMW. However, even with that investment, the losses incurred by BMW have escalated year after year. Over the past two years, they amounted to £1.3 billion. BMW informed me that it was the scale of those losses that led to today's decision.

Mr. Tony Baldry (Banbury) rose--

Dr. Vincent Cable (Twickenham) rose--

Mr. Byers: I want to make some more points.

The Government are disappointed that BMW has decided to adopt a different business strategy to the one that was agreed with us last year. We regret that.

Specific points were made about grant aid applications.

Mr. Tom King (Bridgwater): The Secretary of State pointed out that BMW found it necessary to change its strategy. Given the scale of the losses, any board would consider doing that. On what assumptions about exchange rates was the original strategy based? Does the Secretary of State know about that?

Mr. Byers: The right hon. Gentleman will have to raise that issue with BMW. The company makes decisions based on its own estimates.

Dr. Cable: Will the Secretary of State confirm that the exchange rate assumption used by BMW--not only for

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its private affairs, but as the basis for the Government grant application--was DM2.40? Was the DTI aware of that detail when the application was approved?

Mr. Byers: It would be better for BMW to confirm figures that may be regarded as commercially confidential. [Interruption.] It is an important point. Opposition Members will be aware that when regional selective assistance applications are made, and the Government and companies enter into deals, that is confidential. I should be happy to reveal the information if BMW gave me approval. However, I shall not put at risk the relationship between the Government and those companies which approach us, in confidence, for RSA by disclosing that information to the House. That would be wrong; I do not intend to do it.

I want to move on to the important points on grant aid--the subject of most of the comments made by the hon. Member for Tiverton and Honiton. She raised a number of important issues about the way in which we have dealt with grant aid to BMW. I want to address them each specifically, and I shall compare how a grant application from Rover-BMW was dealt with under her Government, when she was a Minister, with how we have dealt with this particular application about which she has been so critical.

Mr. Bernard Jenkin (North Essex): What is the right hon. Gentleman going to do?

Mr. Byers: I know that the hon. Gentleman does not like to face the facts, but, on this occasion, he will have to, because I am going to go through them.

The hon. Member for Tiverton and Honiton would not answer my intervention about the number of occasions on which the Conservative Government had disclosed commercially confidential information. On no occasion was commercially confidential information revealed--not once. On how many occasions were discussions held with the European Commission before an offer was made to a company, and on how many occasions were the principles agreed in advance with the European Commission? Not on one occasion--that is the reality of the situation.

Today's serious announcement from BMW about the future made no reference to the grant aid being made available. No reference was made because for BMW it is not the big issue.

Let us consider two grant applications: the £152 million on which the hon. Lady has concentrated and the regional selective application for £22.5 million for the Hams Hall engine facility, which was also for Rover-BMW and was dealt with under the previous Conservative Government. On the £152 million grant that we intended to make available to Longbridge, the deal was struck with BMW on 23 June last year. We notified the European Commission on 20 August, which was just under two months later.

The application for Hams Hall was far smaller.

Mr. Nick Gibb (Bognor Regis and Littlehampton): Will the Secretary of State give way?

Mr. Byers: I will give way in a second, but I want to go through the facts.

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The application for Hams Hall was a lot smaller-- £22.5 million. The deal was struck by the Conservative Government on 15 November 1996, but it was notified by this Labour Government because the Conservatives did nothing about it while they were in office. It was not until 7 May 1997 that notification was given to the European Commission, and it was not until 22 January 1998 that approval was finally given. There were 14 months between the deal being struck and the grant being approved.

On Longbridge, the deal was made on 23 June 1998; on 20 August, notification was given to Europe; and Commissioner Monti agreed on 20 December that a decision would be taken within six months. Within a year, we would have learned the outcome--a year compared to the 14 months for the application for Hams Hall. We were moving far more quickly on the grant aid for Longbridge than had ever happened before.

Mr. John Bercow (Buckingham): The Secretary of State is certainly putting a brave face on his own crass ineptitude in this matter. Is he seeking to play down the significance of the grant aid package because he recognises what was stated in The Economist this week by an unnamed official? It reports that, when the Secretary of State spoke in Brussels on 7 March this year, the response from Mr. Monti was, as the unnamed official said, a polite two fingers.

Mr. Byers: I know that the hon. Gentleman has a remarkable memory, but I think that he will find that the 7 March reference was to a conversation that the Prime Minister was supposed to have had with the Commission. He did not speak to Commissioner Monti about this particular issue. I think that the hon. Gentleman will find that that is the case.

Commissioner Monti has agreed to put this application on a fast track, and that is exactly what he is doing. We have maintained a close relationship with BMW over this period and we have put suitable pressure on the European Commission. As a result, it is dealing with this application far more quickly than it has dealt with similar applications. That is the position.

Mr. Gibb: Will the right hon. Gentleman confirm again that the formal notification to the Commission took place in August, and not in December, because the Commission and all the press coverage indicate that the Commission received formal notification of the state aid in December?

Mr. Byers: That is wrong. The Commission was formally notified in August. On 22 December, the Commission decided to launch an investigation into whether the grant should be made available. Between August and December, we were providing the Commission with information, and in the light of that it decided that an investigation was needed. That is the policy that Commissioner Monti has adopted with every grant aid application for cars that has landed on his desk.

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Mr. Geoffrey Robinson (Coventry, North-West): I support my right hon. Friend in rebutting the Opposition's attempts to turn the matter into a party political issue. There is no question--[Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman. He has been given the opportunity to intervene, and he should be heard.

Mr. Robinson: I am grateful, Mr. Deputy Speaker. There is no question but that the Government, and my right hon. Friend himself, have given the maximum support to a normal application for aid under the EU treaty. That is not an issue. The issue today for a major part of British industry and for those who can put this matter ahead of party political matters is surely that BMW has reneged on its undertaking to the Government and the British motor manufacturing industry and all its workers. It may be beyond the point of recall, but it still has to be stated that BMW came in, cherry picked what it wanted and walked out when things got too expensive. Although my right hon. Friend tried very hard, does not this hold the lesson for all of us that, even in a global economy, ownership is terribly important?


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