bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Investment bankers from London to Frankfurt, and Zurich to Milan cannot contain their amusement.

 A tortuous 10-month battle for the most prestigious car company in the world, Rolls-Royce Motor Cars, has ended in farce.

 Volkswagen, which has been pursuing an aggressive expansion strategy to thrust it into the very top-end of the luxury car market, is spending GBP470 million (about HK$6 billion) for the rights to own the company, but after 2003, will not be able to use its name.

 Instead the famous angel emblem of Rolls-Royce, known as Emily, the Spirit of Ecstasy, and which alone is of significant value to the Rolls-Royce brand, is being passed to BMW.

 For only GBP40 million, BMW, which fought a tough battle for Rolls-Royce against VW, has obtained rights to produce Rolls-Royce cars in a deal with aero-engines manufacturer Rolls Royce Plc, the owner of the Rolls-Royce marque.

 'BMW now has the right to produce cars with the brand name and Emily on the front grill, for only GBP40 million - a cheap price,' said Robert Halver, motors analyst at Bankhaus Delbruck in Zurich.

 'In fact it is VW who have really paid the price - GBP470 million. It's the new corporate style in Germany,' Mr Halver added, sarcastically.

 The extraordinary turnaround of events stems from Rolls-Royce's complex background, and its original ownership.

 In 1970, Rolls-Royce's original owners, the aero-engine maker Rolls Royce Plc, collapsed after crippling development costs for its RB-211 jet engine overwhelmed the company.

 Liquidators at the time, seeking to hive off assets to try and pay back the company's debts, sold Rolls-Royce Motor Cars - along with the non-exclusive right to use the name - to the British defence engineering group Vickers, but the actual ownership of the name remained with the old aero-engine manufacturer.

 After Rolls Royce Plc began to find its feet again, it hung on to the coveted Emily symbol, as a vital marketing tool for its own aero engines.

 When last year Vickers announced it wanted to sell Rolls-Royce Motor Cars, Rolls Royce Plc made clear they would be happy to allow the name to go with it, so long as they regarded the future owners as reputable, and willing to protect the brand name.

 As it became clear that the race for Rolls was between VW and BMW, Rolls Royce Plc said BMW was much its preferred owner of the brand name.

 Vickers, on the other hand, felt far more attracted to VW, which not only had much deeper pockets than BMW and could produce a higher bid, but also promised to buy up Vicker's other engine manufacturing group Cosworth.

 The net result was that while VW took control of the future production and development of Rolls-Royce cars, which includes an under-invested factory in Crewe, northern England, Rolls Royce plc had decided to sell Emily to BMW.

 'This came as a real surprise,' said Jurgen Giese, motors analyst at Georg Hauck & Sohn Bankiers in Frankfurt.

 'I think everybody thought that with the purchase of Rolls-Royce, VW had also bought the name.'  Analysts say that what VW seem to have severely underestimated is the close relationship between BMW and Rolls Royce Plc. BMW already supplies engines for the latest Rolls-Royce Silver Seraph, but it also helps develop aero-engines with Rolls Royce Plc, producing the BR710 corporate jet engine, and the BR715 short-haul regional jet engine.

 Under the deal with VW, BMW will continue its lucrative supply contract with Rolls-Royce Motors, and still keep the Rolls-Royce name, while VW is being forced to use the much lesser Bentley name, the other brand Rolls-Royce produces.

 'I think the winner is very clearly BMW, because they get the name, and that's very important, and they already deliver engines and technology to Rolls-Royce and that's very valuable,' Mr Giese said.

 'In contrast VW has to invest money, and pay the purchase price.'  Yesterday, commentators in Britain were up in arms over the fiasco, condemning the inability of Rolls Royce Plc and Vickers to seek an amicable solution that would have kept the cars and Emily together.

 In an editorial, the conservative newspaper, The Daily Telegraph, called the deal an 'unbelievable shambles', blaming VW for not reading the small print of its purchase contract, and Vickers for greedily going for the highest offer.

 'It would be quite understandable if, in a fit of pique, BMW boss Bernd Pischetsrieder took his booty back to Germany, renamed the flying lady Spirit of Schadenfreude and simply added it to the list of BMW optional extras,' the editorial said.

 Fortunately for Rolls-Royce traditionalists, BMW shows no sign of being so dismissive of its newly won prize.

 It is more likely that Mr Pischetsrieder will use his corporate coup to its fullest advantage in what is turning out to be a growing race for dominance in the luxury car market.

 Germany's other leading car manufacturer Daimler-Benz has this week announced its intention of going head-to-head with Rolls-Royce, with its new Maybach model, and BMW, eager not to be left out, is highly likely to use its rights to Emily, to launch its own high-class luxury car.



Spirit of Ecstasy flees to rival as VW finessed in financial farce