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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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