|[23 JUL 98] ROVER
GROUP PRESS RELEASE
Rover Group Moves To Counter Overvalued Pound
The Rover Group, Britain's largest car manufacturer and exporter of
consumer goods, today announced a series of measures to offset the impact of the
overvalued pound. They include production cuts and a manpower reduction programme
involving at lease 1,500 jobs.
Some product lines at Rover Group's Birmingham, Solihull
and Oxford factories will begin a four day week from mid-August. Further job losses
will be avoided if an expansion of flexibility arrangements, including a carry over of
working time from 1998 to 1999, is successfully implemented.
Dr Walter Hasselkus, Rover Group chairman and chief
executive, and BMW board member said:
"We have been protected from the
effects of the strong pound by forward buying of currency, but this protection cannot last
forever. The time has come when we must take action. These measures will
protect the business for the short term without threatening long term investment, our
lifeblood for the future, and will maintain progress towards our strategic objective of
profitability by the end of the decade.
"Although our productivity has improved significantly
in the last few years it cannot compensate for the distortion in trading conditions caused
by the 30 per cent decrease in sterling competitiveness since 1996. At a time when
Rover Group's exports are increasing, the negative effect of currency on our business is
considerable," he said.
The company also announced a medium term strategy to source
more of its bought-in components from outside the UK, taking business worth more than a
billion pounds away from UK-based suppliers. New component sourcing arrangements
will begin with Rover's new luxury car - the R40 - which will have an overseas content of
between 25 and 30 per cent, compared with the current Rover Group average of 15 per cent.
The job reductions, which will affect all operations except
research, design and engineering, will be achieved through voluntary redundancies, early
retirement, natural wastage, the ending of short term contracts, and filling many future
manpower requirements from within the company. All attempts will be made to avoid
compulsory redundancies. It is envisaged that the shorter working week will be
compensated for by carrying over the hours not worked, to support production for future
planned growth next year.
Dr Hasselkus added:
"The service and financial sectors of the UK economy
give a false impression of what is happening in the real world of manufacturing and
international competitivess. The current value of the pound means our revenue from
vehicles sold abroad is reduced, while cheap imports are sucked into our home
Parent company BMW Group today announced that Rover Group
worldwide sales for the first six months were 10,000 units ahead of the same period last
year. Sales in European markets, in particular, have demonstrated strong increases.
However, the benefit from these sales increases is being eroded by the overvalued
Rover Group Press Office 0121 781 6815