MG Rover, the car group that used to embody Britain's industrial decline, is on track to return to profitability next year, and is planning to assert its independence by designing and building a new medium-sized car on its own, according to its new chief executive.
Kevin Howe said yesterday the group should make a small profit in 2002 after slashing the large losses it inherited from BMW. In 1999, the last full year in German ownership, Rover, including Land Rover which is now part of Ford, lost some £840m. But the now cash-rich car company expects to reduce its own losses to below £100m this year.
Speaking at the Longbridge plant near Birmingham, where a new R75 body shop began production yesterday, Mr Howe said sales this year should be around 190,000 compared with 205,000 in 2000 and should rise to "in excess" of 210,000 in 2002.
Mr Howe said it should begin trading profitably early next year after launching three new MG saloons, variants of the MGF sports car, and a R75 estate over the next few months. The "performance gap" will have to be closed by trading.
From 2004 MG Rover has to start repaying some of the around £500m interest-free loan given by BMW to the 4-man consortium that bought the group, valued at £749m, for a nominal £10 last year.
The loan paid in instalments does not become due until 2049 but, if Rover becomes profitable, it will, in 3 years, pay £25m or 25% of its annual earnings - whichever is the lesser amount - to BMW.
Rover also stands to gain more money from the Bavar ian-based group when agreement is reached on its entire assets and liabilities. But Mr Howe said that the group needed no external financing as it had ended last year with more cash than when it started. Output of the R25 and R45 will remain constant at 2,600 a week but that of the R75, the upmarket model, will rise from the current 600 to 945 in March and 1,200 in September.
The key decision on Rover's future - how to design and fund a new £250-£300m medium-sized car to replace the R25 and R45 series - will be taken in the first half of 2001, with production planned for 2004. Rover is said to be seeking a collaboration agreement with Malaysia's Proton car company, to produce a new platform (basic frame of chassis and engine compartment) - and win economies of scale from common components.
But Mr Howe said this was only one of four options and indicated a strong preference for "going it alone". "It is the best front-wheeled platform in the world and designed to spawn other products. We could probably shorten it and develop an excellent medium car off it," he said. "Early art designs show it looks great and is technologically great."
Another option would be to develop it with a supplier but Mr Howe said: "We could develop that ourselves. And our business cost planning assumes we pay for everything ourselves." Rover now employs just under 5,500 and could hire more labour later this year.
•Unions at Vauxhall are planning a ballot on industrial action at the decision to end car production at Luton with the loss of 2,200 jobs. Conciliatory talks with General Motors senior executives in Zurich yesterday were fruitless.
