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Cost control key to future profits

Rover will be a “lean, mean and agile” carmaker under new chairman John Towers, operating “in a different way to the one which has existed over the past four years”.

Mr Towers, revealing his strategy, believes the keys to success will be to cut costs, centralise production and administration, develop the MG brand to a wider audience alongside Rover and create a flexible, medium-sized business where decisions can be made rapidly.

“The answer to the obvious question 'how can we succeed where the mighty BMW did not' is by not pretending to be mighty,” said Mr Towers. He said the German firm had tried to “do a BMW on Rover” and take it into the premium priced market, which was impossible to sustain.

Rover will operate under intense cost controls and Mr Towers said he wanted to see £1.10 back for every £1 spent. The company will move all its engineering, marketing and head office functions into the Longbridge factory. This will save £50m a year over the costs incurred when BMW was running the business with five major centres and executives flying in daily from Munich.

Mr Towers revealed Rover would benefit, for the first time in more than 10 years, from income from Rover group spares and aftersales, and Rover Financial Services. Under BMW and British Aerospace, profits from these divisions went back to the holding companies and not onto Rover Cars' bottom line.

“When BMW said Rover was losing £2m a day, it did not take account of these extremely profitable areas of the business,” said Mr Towers. The Rover Financial Services contract will remain with BMW Financial Services -one sign of Rover's “continuing good relations with BMW”.

Techtronic 2000, the Rover holding company, owns the MG, Austin, Morris and Wolseley brands and has the Rover name under licence “indefinitely”. But ownership of the Rover name remains with BMW and the German company has also held onto Mini, Riley and Triumph. Rover will continue to sell the Mini Classic until BMW launches the new Mini next year.

Mr Towers said Rover had not yet taken advantage of the finance offers it has on the table, including a £500m working capital loan from BMW, and was now a debt-free business.

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