In an effort to improve financial results and sales, MG Rover is looking to central Europe for the manufacture and sale of new models, and has specifically expressed an interest in Slovakia. Shifting production to lower cost countries will help MG Rover in its bid to return to profitability. However, the company should consider how such a move will affect its brand image.
MG Rover is keen to gain a stronger presence in eastern Europe. In February last year, the company announced that it was in talks with the Polish government to take over a Daewoo plant in the country, after the South Korean manufacturer went into administration owing a substantial amount to the Polish government. It seems that MG Rover, frustrated by the lack of progress with the Polish plans, has turned its sights to Slovakia.
It would not be the first time MG Rover has looked abroad to strengthen its position in the market. The company struck a deal with China Brilliance in March last year to manufacture new models and engines for sale in Britain and China. However, the joint venture did not succeed. In December of last year, the company went into partnership with the Indian manufacturer Tata Engineering to make the replacement of the Rover Metro.
Over the past few years, central Europe has attracted an increasing number of car manufacturers as they respond to a global slump in sales and a shift of production from western Europe to countries with cheaper labor.
The past few years have been tumultuous for MG Rover. The company was sold by BMW to Phoenix Venture Holdings in 2001. Since then, the firm has not been able to break even and its brands have hardly featured in the top ten sellers. Overall, new car sales of MG Rovers in western Europe fell by 2.7% and in the UK, MG Rover models sales were down 3.3% to 95,848 units in 2003.
By 2005, profits will be expected following the launch of the new shape Rover 75, which will target young drivers in a bid to win back share especially in the UK market. The company has a strong product offering in terms of specifications and prices; shifting its production to low cost countries will be an important step in reviving margins. However, the key to the company's success probably lies in improving its brand image and customer appeal.