Frankfurt – The maker of BMW autos announced the departures of its two top executives Friday in a rare German boardroom revolt that analysts said was triggered by heavy losses at the company’s British Rover Automaking subsidiary.
Persistent problems at Rover forced the exit of Bayerische Motoren Worke Ag`s Chief Executive Bernd Pischetsrieder, 50. and his heir apparent on the company board. Wolfgang Reitzle, 49. The two men were long-time rivals, and both had worked at BMW for more than two decades.
Although Mr. Pischetsrieder`s job has been the subject of intense speculation, the development shocked the auto industry because of Mr. Reitzle`s reputation as a talented and visionary manager whose skills have been crucial in recent years in polishing BMW`s sporty and youthful image.
The shake-up leaves a relatively unknown BMW board member, Joachim Milberg, 56. as the head of one of Europe`s most prestigious auto-makers.
BMW`s supervisory board made the decisions at an extraordinary meeting* at its Munich headquarters. In a sign of possible dissent, the meeting lasted into the evening. BMW stock closed Friday at 682 Euros ($770), up 23, on hopes Pischetsrier would be ousted.
In a brief statement, BMW said that both Mr. Pischetsrieder and Mr. Reitzle had resigned without giving reasons. The board meeting had been called to discuss Rover, the company said. Simultaneous exits by two top executives are virtually unknown in German business.
«It`s a very rare situation when board members, especially the chairman, are kicked out when they still have a contract», said Jurgen Roethig, an analyst in Frankfurt at B. Metxler & Co.Bank.
From the moment Mr. Milberg begins his job, his most pressing task will be a turnaround at the unprofitable Rover operations.
Rover`s fate threatened Friday to become a heated political issue in Britain where automakers are concerned that Munich-based BMW might consider shutting down Rover`s flagship productions plant in Longbridge, near Birmingham.
British government officials joined trade union officials in demanding that BMW honor a commitment made in December that would keep the plant open.
Autoworkers said they feared that new management could bring an eventual shutdown of Longbridge, the largest Of Rover`s three factories and the oldest auto plant in Great Britain.
Rover`s 1998 losses are estimated to have been as high as 1.5 million Deutshe Marks ($869.3 million), greater than last year`s entire BMW group net profit figures for last year.
Analysts said the supervisory board had lost patience with Mr. Pieschetsrieder because Rover`s poor performance had overshadowed a record year at BMW`s German operations. BMW sold a record 699, 378 cars last year but its profit dropped for the first time since 1993 because of Rover.
Long Bridge assembles most of the line of Rover passenger cars, which plunged in sales last year by 17 percent to 303, 800.By contrast, Rover`s popular Land Rover sport-utility vehicles-which are built at the Solihul plant near Oxford – and a 20 percent jump in 1998 demand to 153.500.
BMW evidently was surprised by the magniture of Rover`s problems. The company was slow to recognize Rover`s 30 percent productivity gap with BMW`s Bavarian plants. Mr. Pischetsrieder led the 1994 acquisition of Rover as one of his first actions as chief executive. His mistake, analysts say, was to manage Rover at arms-length. An Anglophile who speaks fluent English, Mr. Pischetsrieder was worried about anti-German feelings, and he maintained Rover as a separate company.
Br. E cars honour
Am. E. autos honor
Read the text again and decide if the following statements are true (T) or false (F).
1. BMW announced that Mr. Pischetsrieder and Mr. Reitzle were leaving because of losses at Rover.
2. The auto industry had expected that both Mr. Pischetsrieder and Mr. Reitzle would resign.
3. In German companies it is common for several board members to resign when a company has serious problems.
4. The British government is prepared to allow BMW to close the Rover factory at Longbridge.
5. BMW made more than $870 million in profit last year.
6. Last year BMW sold more vehicles than ever before.
7. All divisions of the Rover group have been performing badly.
8. The problems at Rover are more serious than expected.
9. Rover and BMW factories are equally efficient.
10. One of Mr. Pischetsrieder's main mistakes was that he intervened too directly in the management of Rover.
Task 4. Answer the following questions on the text:
What is the key issue of the article?
What was the departure of the two top executives triggered by?
When did the acquisition of Rover take place?
Why was the job of Mr. Pischetsrieder the subject of intense speculation?
Why was the auto industry shocked by the news?
What reasons did the manager give for their resignation?
Who is going to take over? What is his most pressing task?
Why did Rover's fate become a heated political issue?
What did the British government demand?
What performance did the British subsidiary show?
How did it compare with the parent company?
What was the main mistake of the chief executive?
Speak about the performance of Rover company and analyse the problems they face.
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