COMMENT: Don't be sentimental over the death of the 'English Patient'

COMMENT
Franz W. Rother is Editor-in-Chief of Automobilwoche

The English Patient is still twitching, but its death is not far off.

In a few weeks' time MG Rover, the last independent British carmaker, will pass away after a 30-year illness.

While PricewaterhouseCoopers administrators try to save at least part of the company, the fight over the inheritance has already started behind the scenes.

China's Shanghai Automotive (SAIC), which decided to leave the terminally ill company to its fate after months of negotiations over a partnership, was shrewd enough to buy the rights to both the Rover 75 and Rover 25 and their engines for 67 million pounds. Now SAIC can theoretically build the cars under their own name in China.

MG Rover's owners, the Phoenix Group, also did well. Six years ago the Phoenix investors paid the symbolic sum of 10 pounds to take MG Rover off BMW's hands. They then paid themselves millions of pounds while mismanaging the business.

Despite claims to the contrary by some British trade unions, BMW, MG Rover's former owners, is entirely blameless.

During its six-year reign, BMW invested three billion euros in the company, which was dubbed the "English Patient" because of its chronic problems. The automaker used up a dozen top-class managers and a promising boss in the struggle. Former BMW chairman Bernd Pischetsrieder was forced to quit in February 1999 after mounting Rover losses.

His successor, Joachim Milberg, was clever enough to sell Land Rover to Ford for 1.8 billion euros. He also kept the Mini brand for BMW, which meant that the Bavarians' would have something to show for their involvement in Rover.

What can the auto industry learn from the Rover disaster? That even illustrious brands rapidly lose their value if their core qualities are not constantly groomed. Sentimentality and nostalgia hide reality.

General Motors is right to consider killing the Buick and Pontiac brands. Fiat Auto would have one less problem if it shed Lancia. Audi would be well advised not to revive the Horch brand.

Rover's collapse teaches us another thing. Acquisitions and mergers are very risky growth strategies. It is surprising how many risks remain hidden even after the most thorough examination of a company. Consider DaimlerChrysler's partnership with Mitsubishi Motors and Ford's takeover of Land Rover.

The risk is much higher with supposed bargains. Lovers of new and vintage cars know that. But it didn't prevent experienced managers from falling upon such a hopeless case as Rover.

The only true victims here are the Rover employees. During the past few years they believed their management's exhortations to hold on and they put up with a great deal without complaint.

Rover dealers in Germany seem to be fairly calm regarding the recent developments. Most of them lost hope when BMW bailed out. After that, hardly any dealers placed their bets solely on MG and Rover.

Now their multi-branding seems to be paying off. It demands higher investments but also reduces the risk.

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