Tom Purves, CEO of BMW (US) Holding Corp., says BMW's $1.3 billion purchase of Britain's Rover Group in 1994 was a bargain. BMW has poured more than $3 billion into Rover. Rover lost nearly $1 billion last year.
Purves, 50, is the former Rover board member for sales and marketing. He was appointed to in March 1999. In August, he added the title of president of BMW of North America Inc., the U.S. sales and marketing arm.
Staff Reporter Jim Henry interviewed Purves near the BMW factory outside Spartanburg, S.C. Edited excerpts follow:
BMW says in its half-year report it is spending one-third of its five-year investment plan of 30 billion marks (about $16 billion) in the United Kingdom. That seems way out of proportion, relative to sales.
The purchase price of Rover was very low. If you add up the purchase price, the investments made so far, with the losses so far, it is still dramatically less than Ford paid for Volvo, or dramatically less than Ford paid for Jaguar. We got five brands and 20-odd products. It is on a different scale than Jaguar, and a different scale than Volvo, even. That makes it a bigger task.
Why the big effort to turn Rover around now, instead of from the beginning?
Unfortunately, things have taken longer than we planned. That is partly because of a (hands-off) management philosophy, which has changed. And it is partly because (the British pound) sterling has been stronger than anybody anticipated (which drives up costs in pounds, and drives down profits in deutsch marks).
So spending on Rover is based on its future potential, not its present sales volume.
Rover eventually will sell more cars than BMW. It will have to. If we spent that kind of money on developing a BMW 1 or 2 series (below the current lineup, instead of buying Rover), others in the industry wouldn't bat an eyelid.