Above: Proton's 2001 model year Waja could make a useful platform for a “junior Rover 75” to replace the ageing Rover 45, perhaps with Lotus help

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  • 'How John Towers can save Rover', CAP (May 2000)
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    Rover under John Towers: where to from here?

    In our progress report on MG Rover under Phoenix, the consortium that bought the former BMW division, we conclude that things are not as gloomy as some media commentators, especially the British press, have made out

    WE’VE NOW had the meeting within the MG Rover Group that showcased upcoming MG-branded sports variants of Rover cars. The MG X10, based around the 75, may seem a cynical exercise to some, but it hits precisely the sports-luxury positioning that this magazine talked of in May.
       Is it enough? Didn’t we also warn in May that MGs must be unique cars and in this day and age, badge engineering was a bad thing? Yes, but we also didn’t forecast how MG Rover, under John Towers, has gone against this advice. It appears that MG, which will continue producing the F and still-wilder versions of that model, will become to Rover what AMG is the Mercedes-Benz or Irmscher to Opel. Marketing the sporty 75 as the X10 adds to the European-like designations, something which MG Rover was wise to do in order to get share-of-mind amongst audiences. Especially Continental audiences. Rover will be a value brand—as recent price cuts have shown—while MG occupies a more premium niche.
       This is a neat fix that should bring a few smiles given the attacks coming from numerous quarters toward MG Rover. Long-term it could hurt the MG brand as a stand-alone marque, but it has survived worse applications.
       There should be more good news. Towers is right that running MG Rover with reduced factory capacity (without the Oxford plant which BMW held on to) will aid the firm to get a better cost structure; with this in mind earlier projections of profit do not seem as over the top any more. The company might have had resignations from two non-executive directors, shaking the City, and there’s concern about falling production. Yet Rover’s success—or the success of any modern organization—will be highly dependent on marketing. Right now there is little to show, the oft-criticized absence of the British Motor Show aside, that the company’s direction is downward. It has not made completely perfect moves but it has also not gone all wrong as the sensationalist British press seems keen to impress.
       Where to next? We would advise MG Rover to look at investing in technologies that will reduce costs further. There is an opportunity to make use of greater computerization. The cross-functional teams aided by advanced IT that Chrysler used, before its takeover by Daimler-Benz AG, seem the most efficient way for the company to beat competitors. Plug in marketing with design and engineering. Create sport-luxury niche vehicles on existing platforms. The pace of development—getting cars to market in record times—should be something that Towers and company need to concentrate upon, perhaps setting an ultimate target of 15 months. Being a smaller company, it needs to look at gaining a unique core competency to separate it truly from larger competitors.
       Indeed, the company could learn a great deal from post-Iacocca Chrysler. And Britain still has, fortunately, the talent—but there must be no empty Yes, Minister rhetoric, something that managers need to be wary of today. This will, despite the impatient City commentators, take more than six months—but it must start happening today. IT is one solution to MG Rover, at least in terms of infrastructure. Fortunately, the foundations are there.
       There’s more to come. Rover’s Honda-based 45, overdue for a revamp, won’t be based on the BMW-developed 35 and 55 compacts that we predicted. Instead, there is a chance of cooperation with Malaysian firm Proton. Proton initially started in the 1980s making its own version of the Mitsubishi Lancer (still in the domestic line-up as the Proton Iswara); today the line-up consists of various models around the old Mitsubishi Mirage platform (sold variously as the Putra, Compact, Satria, Wira, 300- and 400-series) and a flagship called the Perdana, based on the Mitsubishi Eterna, and Proton’s own self-developed car, the cohesive though not beautiful Waja. It is this last model that is tipped to provide a platform for the 45 successor. Proton’s ownership of Lotus could be an excellent bonus—imagine a Lotus-bred MG, just as original Rover bidder Alchemy Partners targeted.
       There must be a sense of déjà vu at Longbridge as the story sounds not unlike Project Bounty, where BL (one of Rover's former identities) and Honda cooperated on the construction of the Triumph Acclaim (née Honda Ballade) in England, beginning in 1981. While the Rover car will look nothing like the Malaysian model, it’s not exactly uncharted waters for the company. In fact, it makes perfect sense and helps the company get a potential volume seller for minimal cost. Similarly, it makes sense for Proton to do something with the 75 platform—although that is mere speculation on CAP’s part. Likewise, the subcompact entry-level Proton Tiara (née Citroën AX) could be replaced by a joint car developed around the 25’s successor. The Malaysians might even be interested to create a world-beater based around the Mini Spiritual—a car we’d love to see hitting the streets some time this decade and which should knock the BMW Mini for six by being as advanced as Issigonis could have made it if he were alive today. Proton has already developed competencies in rapid prototyping thanks to Lotus, the very asset that could help MG Rover reduce its costs to be competitive.
       Long term, there must be some scratching their heads over a potential Rover–Proton alliance. It was speculated in the British media in mid-October. This should be a longer-term ambition rather than something that MG Rover needs to rush in to now. Quotes since then from Rover confirm that the company could possibly go it alone though CAP agrees with automotive industry expert Prof Garel Rhys that partnering is a good idea.
       Proton could make a great deal of sense for Asian markets. Rover will have, without the headaches that GM and Fiat have experienced over Korea’s Daewoo, a gateway into Asia-Pacific markets. MG Rover’s stand at the Sydney Motor Show illustrates a desire to export and re-enter these markets, once highly successful for the old British Motor Corporation. Joint production of models could make sense, too, particularly to get the production levels—and therefore revenues—required to develop new models. MG Rover must not fall into the trap of the old British Leyland, where R&D funds were always dangerously low. A possible obstacle is the 16·06 per cent of Proton held by Mitsubishi and Mitsubishi Motors and how cooperation would fit with 34 per cent stakeholder DaimlerChrysler AG.
       Is Proton the only partner? Peugeot-Citroën could be a contender when one considers fairly good strategic fit; furthermore, the French company does not have a corporate sports car. Its divisions have found it hard to break in to the executive markets although it’s too early to tell how well the Peugeot 607 will fare. That could be solved with Rover’s help. A 45 successor on the Peugeot 307 platform makes good sense, too, while development of the next 25 could be done with the 107 and Citroën C3. However, PSA’s plans for these sectors are already well advanced. Like any relationship, timing is part of the key. And there can’t be much comfort in thinking of the demise of the former Chrysler Europe, a.k.a. Talbot, while under PSA.
       For now, there is a feel of "one day at a time". It’ll continue while owner Phoenix and BMW quarrel over the balance sheets that will prevent completion of the sale, but there’s light further on through the tunnel. The only question is whether it’s daylight or the headlights of a juggernaut of pessimistic British opinion. We’re willing to bet it’s the former if MG Rover directors can get their next steps right.

    Jack Yan Editor

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