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Germany: Battle For Rolls Royce Ends In Surprise

  • Breffni O'Rourke

Prague, 3 August 1998 (RFE/RL) -- The battle for possession of Rolls Royce motors is a story of big money, ambition and intrigue in pursuit of one of the world's great symbols of prestige.

Rolls Royce cars have been a symbol of luxury and extravagance almost since it was founded in England in 1904. The crowned heads of Europe, American movie stars, Indian maharajas, and top industrialists around the world have been the circles traditionally associated with these opulent vehicles.

On occasion, customers were also found in less expected places. For instance, the late Soviet state and party leader Leonid Brezhnev was an enthusiastic Rolls Royce driver.

For most of this year, two of Germany's major automobile manufacturers, Volkswagen and BMW, have been competing to buy Rolls Royce and its closely linked sister marque Bentley. The struggle reflects the driving ego and ambitions of the top men at Volkswagen and BMW, Ferdinand Piech and Bernd Pischetsrieder. The struggle ended last week with a sensational move which could spell trouble for the career of VW's chairman Piech.

That's because although Volkswagen won control of Rolls Royce motors with a bid of almost $800 million, it has failed to gain access to the actual name Rolls Royce. BMW got hold of the name for a mere $65 million, and plans to start production early next century of cars bearing that name.

In the long run, all that Piech has for his $800 million is the Rolls Royce factory at Crewe, in central England, and the right to manufacture Bentleys. Volkswagen now says that its main aim was always to acquire Bentley, an under-utilized brand name which has been for many years only a badge for slightly less expensive or more sporty versions of the Rolls Royce.

Although Bentleys in the 1920s and 1930s were race-winning sports cars, the luster of the name gradually faded as they became imitations of the Rolls Royce. Analysts believe that the deal is a defeat for Volkswagen at the hands of its rival BMW, which moved cleverly and quietly to achieve its aim.

Piech has to acknowledge that he paid for the big prize and got a half-empty box instead. That's because the name belongs to another, separate company, the aerospace manufacturer Rolls Royce PLC. The aerospace company and BMW have a long history of cooperation in the aero engine field, and that British company was not willing to part with the name to anyone other than BMW.

It's not clear how Piech and the other top management at Volkswagen managed to drive their deal so far without taking care to secure the rights to the name. It appears Volkswagen simply assumed that Vickers, the parent company controlling Rolls Royce aerospace, would pass on the name once Volkswagen had possession of the physical assets. Analysts say that Piech is likely to have to answer some awkward questions from shareholders over the affair, and that his leadership could come under attack.

The deal does not threaten the financial health of the VW group, which is Europe's biggest car maker, and which increased its profit by 70 per cent for the first half of this year to almost $470 million.

As things stand now, VW has the right to manufacture the latest models of both Rolls Royce and Bentley cars until 2003, after which it can use only the Bentley label.

Both cars now use BMW-made engines, and BMW will not supply them to VW after 2003. So in addition to everything else, VW must bear the cost of developing new engines for the Bentleys.

What VW does gain is the recently updated Crewe factory, where the workforce has unrivaled skills in crafts such as leather and wood work, and in putting together cars practically by hand. BMW, by contrast, has the brand name of Rolls, the existing range of engines and little else. It is committing itself to the hugely expensive process of building a new factory in England to produce Rolls Royces after the separation. And it will need to gather craftsmen of rare skills at the new site to satisfy potential customers that these cars really are Rolls Royces, not some sort of imitation.

Complicating the issue is the decision of another top German manufacturer, Mercedes Benz, to produce a new super-luxury car to rival the Rolls Royce, to be called the Maybach. That name harks back to the 1930s, when Maybach was one of Germany's most expensive makes.

All these developments mean that within a few years the plutocrats of the world will be able to choose their personal transport from a wider selection of cars than at present. It is not at all certain that this tiny market will prove big enough to support all these different marques.