Experts predict rocky road for Rover suppliers

31 May 2000
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01 June 2000 | David Arminas

Suppliers to the Rover plant in Longbridge face hard contract negotiations and draconian measures, automotive industry experts have warned.

The caution comes despite reassurances from Phoenix, Rover's new owner, that the plant, near Birmingham, will produce 200,000 cars a year. The consortium, headed by former Rover boss John Towers, bought the company for a nominal sum of £10 last month.

Phoenix will have to cut production costs in order to make a go of the company, said Peter Cooke, professor of automotive industry management at Nottingham Business School (NBS). "Phoenix has said it will honour existing BMW agreements, but for how long? The strength of the pound is an Achilles heel and there is a huge excess of parts in western Europe," he added.

While the sale to Phoenix is seen as a much-needed boost for the UK car industry, especially now that Ford has announced that its Dagenham plant will cease car production in favour of making engines, this boost may be short lived and Phoenix could scale down production, said Cooke.

Price reductions under BMW doubled Rover's sales for April, with the Rover 25 becoming the UK's best-selling car. Rover's UK market share rose to 13.5 per cent, surpassed only by Ford.

But as Towers has vowed to maintain pricing levels, someone will have to foot the bill for the cuts, according to Professor Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff Business School.

Rover suppliers can expect "draconian measures", he added, and long-term production depends on how well Phoenix can keep costs under control.

An NBS study of Midlands-based suppliers last year found that many still believed that Rover business would continue to come their way, said Cooke.

But Rover suppliers are living on borrowed time, insisted Mike Dodd, managing director of Crossland Cutters, an upholstery service company that does not supply Rover. "Rover has not been competitive enough in looking at its supplier base," he said.

But some suppliers are optimistic. The Phoenix deal is "the best in the circumstances", a spokesperson for Rover supplier Screw and Rivet told SM.

SMjun2000

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