BMW Roves Into Sport-Utilities

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BMW's purchase of Britain's Rover Group will enable the German automaker to beat Mercedes-Benz to the punch in entering the booming sport-utility segment.

Under terms of the $1.2 billion deal (AA, Feb. 7), BMW AG gets an 80% stake in Rover Group Holdings, a subsidiary of British Aerospace. Japanese automaker Honda Motor Co. owns the other 20% but is said to be re-examining whether it wants to back out of its holding.

BMW Chairman Bernd Pischetsrieder told Automotive News the next-generation Rover 800 series likely will be built on a BMW platform and sold by BMW dealers in the U.S. and elsewhere, possibly under the Riley name.

Rover is best known for its upscale Land Rover and Range Rover sport-utilities, both marketed in the U.S. by Land Rover North America. Within 18 months, versions of those Rover products could be wearing a BMW badge, said Thomas O'Grady, president of Integrated Automotive Resources, a Newark, Del., marketing consultancy.

German luxury carmaker Mercedes-Benz AG is planning a 1997 debut of a $30,000 sport-utility vehicle that will be built at a new plant in Vance, Ala.

Products like the Ford Explorer, Jeep Grand Cherokee and Chevrolet Blazer have fueled a boom in sport-utility vehicles during the 1990s. Last year, nearly 1.2 million compact sport-utilities were sold in the U.S., a 20.6% increase from 1992, as well as 181,477 full-size sport-utilities, up 30.6%, according to J.D. Power & Associates.

The acquisition also gives BMW access to several sports car brands not currently marketed in the U.S.-MG, Triumph, Austin and Morris.

The deal raises questions about future agency relationships. For now, BMW is planning to keep products and dealerships separate in the U.S., but those distinctions may blur in time.

BMW of North America is handled by Mullen, Wenham, Mass.; persistent rumors have spoken of a rocky client-agency relationship. Land Rover of North America is handled by Grace & Roth-schild, New York, highly regarded for its use of dry humor in building the Rover brands.

Whether London-based Kevin Morley Marketing will hold onto the Rover account is open to speculation. A spokesman for the agency called the contract with the Rover Cars division "watertight" and added it has another three years to run.

Robin Wight, chairman of WCRS, London, which handles BMW (GB) in the U.K., was unavailable for comment.

Mr. Morley is a former managing director in charge of marketing for Rover Cars. His agency has also provided pan-European creative for Rover. Media buying in continental Europe is handled by Initiative Media, London; Zenith Media buys Rover media in the U.K.

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