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Business Mini Spiritual Rover showed this Mini Spiritual concept car in 1995 but BMW wouldn't build it. One of Yan's strategies in this editorial is to allow the public to create an innovative, sporty "Rover 15" to stir up public support and increase brand profile


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    How John Towers can save Rover

    Jack Yan provides his view on how the Phoenix consortium could save Britain’s last volume automobile manufacturer in the short term, using a low-cost marketing strategy and attaining a sport-luxury-innovation positioning


    THE RELIEF at Longbridge could be felt miles away. Jon Moulton and his venture capitalist partners at Alchemy were out of the picture and John Towers, the CEO of Rover at the time of the BMW acquisition in 1994, and his Phoenix consortium had secured the future of Rover and the majority of its workers by paying a nominal £10.
       But the British press is wondering: what now? Logically, to us at CAP, there are only a few ways Towers can proceed. The British press is unduly pessimistic but if Towers can redefine the once-proud manufacturer correctly, then the two-year return to profit promised by the former Rover boss is realistic. Our recommendations involve following the American reintroduction plan of MG to America proposed by Moulton and pressing ahead with Towers’ idea of injecting Rover with a new, imaginative brand personality. Here, we detail how.

    The deal
    First, let’s examine the deal. BMW was losing £2M daily at Rover through production and other associated costs, although this figure was flatly rejected by Towers. Towers and his colleagues at Phoenix, a group of Midlands businessmen, got a viable business plan up and began serious negotiations with BMW only in early May. By May 10, they had finalized the deal. This was no doubt helped by Towers’ knowledge of the company—despite a five-year absence from Rover, he understood it well.
       BMW will loan the company £500 million and Phoenix has also received a loan of £200 million from an obscure North Carolina bank. Insiders point at further funds being available. BMW is wiping Rover’s accumulated debts but these will be replaced by the £700 million. Towers says that 1,000 of Rover’s 8,500 workers will be made redundant, whereas Alchemy had planned to halve the workforce.
       Not included in the deal are the new Mini, to be launched by BMW this year, the Triumph and Riley nameplates—surely the most valuable out of Rover’s ancestral brands, but BMW said that the deal would be broken if Towers had insisted, he says—and the Land Rover line, which has been sold to Ford. The Longbridge plant is the only one in the deal; BMW retains the old Morris plant at Cowley, which will make the Rover 75 until production shifts to Longbridge.

    What we know
    We know that Phoenix will fund the redundancies from the BMW loan. The Rover 75 estate, which has been finalized in most respects, will soon be launched. And Towers has announced that there will be a new approach through marketing, creating a more emotional and sportier appeal to Rover’s product line.
       We also know that given the economics of modern car production, the £700 million that is publicly known is insufficient to finance producing 200,000 cars annually. BMW had lost £750 million in 1999 at Rover.

    What we think
    The figures seem gloomy but economists and marketers will never see eye-to-eye. The economists JY&A executives (at CAP’s parent company) would have only the lowest-cost producers making cars and we would all drive Hyundais, Daewoos and anything the Chinese could turn out. The reality is that marketing and appeal sell cars in a joint effort with economic sense. Without going into detail, we believe it’s possible for Phoenix to build 200,000 cars—but this depends on clever marketing to get them shifted. A marketing student will probably point to BMW’s lack of definition for the Rover brand as being the primary purpose of the company’s failure, not the strong British pound or the weak euro. And that is what we address.
       Rover is hampered, as shown in one episode of the BBC’s Top Gear prior to the BMW sale, by a home-country image of being an "old man’s car". Even during the Towers years, Rover had perpetuated this image: its 600 and 800 models had a dowdy, ministerial image; its 400 was a typical, dull compact (based on the Honda Civic, it was difficult for it to be anything more). But we were beginning to see a change at Rover: Towers was CEO at the time the Rover 200 (now 25) was launched with its more youthful appeal, and Rover had been trusting enough to give the exterior design responsibility to a 20-something—the very demographic it sought. The MGF and the Land Rover Freelander, two other youthful Rover Group designs, were developed. Now could be the time to see whether Towers’ mid-1990s strategy of endowing Rover with more than just Hyacinth Bucket mannerisms will work.
       But anyone knows change is necessary, so what can be done?
       First, the new CEO to be appointed by Phoenix—this is to happen any day now—must understand that this is a short-term solution pending a proper alliance with a company like Honda, Rover’s former partner. Rover’s lame-duck image won’t help negotiations and some sources believe Honda feels its fingers have been burned (the Japanese company itself has announced that it prefers to stay independent, unlike Nissan [tying up with Renault] and Mitsubishi Motors [DaimlerChrysler]).
       Given that that’s the case, Rover will need to begin a strong programme of differentiation to mark itself out. BMW has already begun that work by competitively pricing the 25, 45 and 75. If it were not for the sale we believe 2000 would have been BMW’s last big loss-making year with the British firm. We projected another loss-making year for 2001, but nowhere nearly as heavily.
       This pricing, however, is not enough, because the Rover brand still stands for little. Its name is still synonymous, at least in its home country, with the upper-middle class. Abroad, the Rover brand does not suffer as much and BMW had done a great deal to improve its profile and dealer network in Europe. In the early 1990s, few in Germany had even heard of Rover. At one point its profile had arrived at an all-time high.
       How to differentiate? The luxury, British BMW route has been followed without much success by both BMW (its advertising reflects a stereotypical Britain) and during the Towers years (in 1994, Rover relaunched the 14-year-old Austin Mini Metro as the home-market Rover 100). The sports-luxury sector is where BMW itself lies—but this makes instinctive sense. The heritage of Rover’s P5 Coupé and the P6 3500 V8 pointed at a performance edge for the pushy executive of the 1960s. Today’s equivalent surely would be the Generation X interested in a high-performance yet affordable automobile.
       Rover will not compete with BMW. Its 75 may compete with the 3-series but it is targeted more as a volume seller than a specialist car. The 25 has a sporty stance. The new 35 has been developed with a similar flavour and even the 45 V6 hints at the P6 3500 idea. It seems to be the safest route to follow because the developmental work has been done. In short, Rover won’t have to lie to the public about the sports-luxury edge. Alchemy’s plan to badge-engineer Rover passenger cars with the more overtly sporting MG brand would have been tantamount to fooling the public. More importantly for cash-strapped Phoenix, the new route for Rover, perhaps without the British stereotype and aristocratic ambition, the sports-luxury edge can be achieved cheaply without a great revamp of its dealer branding.
       This is more the territory for the Triumph brand, though. BMW’s insistent holding on to the name gives rise to much speculation. While BMW has been weakened, we cannot dismiss the development of Triumph, for the same was rumoured in BMW’s München HQ in early March. Thus, Rover will need to have an additional "edge" to the sports-luxury positioning. As explained below, this edge has to be innovation.

    America
    This is not to say Moulton’s plan was poor. Jon Moulton, of Alchemy Partners, had run Rover’s marketing department. He was aware of the huge affection in the United States for the MG brand. So his plan to reintroduce the octagonal badge to the cohorts of American enthusiasts had a great deal of merit. It made sense: MG grew because of America and MG can still grow because of America.
       This, we submit, is one of the golden opportunities that Phoenix and the Longbridge workers have. But it will be costly.
       Rover has been sent packing from America a few times. MG, Triumph and Rover left the United States because of poor quality: the last car to be sold with the Rover nameplate in the US, the SD1, gained such a bad reputation for it. The MG cars being sold in the late 1970s were designs developed by the British Motor Corporation in the 1950s and 1960s. Triumph’s TR7 and TR8 sports cars suffered from the same complaint: Consumer Guide had it right when it noted in 1981 that there will always be a Britain, but given the quality of the TR8, there might not always be a British auto industry.
       Rover’s last foray was the Sterling brand of the 1980s. It showed that even a cash-strapped company could launch a new brand, but the car was a flop. It scored very poorly in the J. D. Power & Associates annual surveys and before long Sterlings could be seen outside Acura back lots being used for spares (it shared a floorpan with the Acura Legend).
       While Land Rover and Range Rover had been successful in entering the US, Rover no longer has these. But it could build on the lessons learned in creating the brands.
       Surely anyone examining a 75 close-up will see the quality: it is a well-made automobile and BMW and Rover’s factory workers deserve every bit of the credit. Reintroducing MG may well be an easy route given that the quality is right these days. The MGF is a few seasons old and not as competitive to American buyers alongside newer offerings such as the Honda S2000, but the mid-engined layout and smart styling will find appeal amongst the buyers who have gone retro with Volkswagen’s Beetle and Jaguar S-type. Most importantly, the brand evokes positive feelings, even amongst those who bought the last of British Leyland’s ill-fated MGBs.

    Future models
    Rover’s car line under Phoenix will be tiny, smaller than that of other European manufacturers such as Peugeot (which has a relatively small line, too). By the end of the year, we are looking at the following models:

  • Rover 25 3- and 5-door subcompact
  • Rover 45 4- and 5-door compact, based on 1994 Honda Civic
  • Rover 75 saloon and estate
  • MGF sports car

    We believe Rover has inherited the Rover 35 compact, an advanced design developed by BMW to take on Volkswagen’s Golf. This is set to be one of the most well developed cars on the market and will help the company in the volume sector.
       But there are huge gaps. Rover needs to capitalize on the junior MPV sector started by the first production minivan of recent times, the Nissan Prairie. This sector is huge in Europe and a Rover MPV on the 35/55 platform is sorely needed. A small SUV based on the 35 could be another option, but its potential against the Land Rover Freelander may see a repeat of the days when BMC developed the Austin Gypsy to compete with the original Land Rover.
       A small sports car on the 35 platform would be a proper successor to the old 200 coupé, and it could spawn a convertible—which rivals GM, Ford, Volkswagen don’t have. This way, Rover would compete with the outgoing Fiat Punto cabriolet.
       In 1995, Rover showed the Mini Spiritual, a revolutionary and spacious supermini-sector automobile that BMW said it wouldn’t build. This rear-wheel-drive, mid-engined supermini possessed what would be class-leading interior room. Instead, BMW went for the retro-styled (but still advanced) 2001 model year Mini Minor and Mini Cooper.
       But any struggling company needs a revolution or huge innovation to help its cause. With a huge percentage of European buyers opting for one-litre cars (DaimlerChrysler is already developing one in a JV with Hyundai) and space efficiency (the Mercedes-Benz A-class, Audi A2, Chrysler Java and Daewoo Matiz being examples of this style) this is a niche Rover must seek at all costs. The Mini Spiritual’s styling is right for 2002–3, builds on Mini styling elements, is as revolutionary as the original Mini in 1959, and could be a world-beater. It's about time Rover got the Mini replacement right, having missed out with the BMC 9X and the Mini Metro.
       A strong web push should be a low-cost way to increase public confidence. Buyers flock to the web to research new models and Rover’s own presence is not as visible as, say, General Motors’. Build your own Mini Spiritual. Or use the web for clinicking or consumer surveys over the design of the new Mini and let the public have a hand in creating the car—how much more revolutionary can a company get, and stir up international public support?
       The web seems to be a quick way to increase differentiation and, along with the 35 and 75 estate, endow Rover with a reputation for being innovators in the sports-luxury field. It would not be out of place, for Rover was known as an innovator in the 1950s and 1960s, with its experimental gas turbine car and the cupholders in the 1960s P5 model. Jack Yan

    Jack Yan is editor of CAP and the chief executive of Jack Yan & Associates. He holds a master's degree in marketing, specializing in identity, branding and business performance and has regularly observed the automotive industry. He can be reached via the Feedback link below.

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