the questions are indicated on the picture

Joachim Milberg took over as chief executive oi BMW in 1999. The board had fired his predecessor, Bemd Pischetsrieder. who had made a mess at Hover. the British volume cannaker that he had bought In 1994. The new boss soon came to the conclusion that the German company could turn round the ailing British subsidiary. Mr Milberg held to that view until eady March 2000. when he concluded that the worsening situation In Britain had become hopeiess. a situation not helped by the continuing strong pound damaging Rover group exports. Hence the decision to sell Rover for a pittance to Alchemy. a group of British venture capitalists who would have ended up making only a small number of sports cars under the MG label. This decision by BMW to sell Rover caused uproar in the British press and among politicians in the West Midlands who feared large job losses in Rover and in the numerous component suppliers located around the region. The West Midlands has many parliamentary seats. often with only small majorities and which regularly change hands at general elections. In the event Alchemy eventually withdrew from the bidding process and the bulk of Rover was sold to the Phoenix consortium for the princely sum of 10! Over the previous six years BMW had spent a total of DM9 billion (34 billion} trying to turn Rover into a car maker with a future. but had posted large losses. as high as 25 billion in 1999 as well as writing down Rover assets by 32 billion in the same year. The disposal provoked a political storm in Britain. which was still rumbling in April 2990. when BMW bosses were summoned to appear before a paniamentary inquiry. The British government was furious that it had leamt about the disposal from a leak in the Gennan press. Mr Milberg retorted that the British govemment had been slow to hear the signals he sent in telephone cells before Christmas as Rover's situation worsened. Even this reply further infuriated the British government as it came under press criticism for failing to 'read' these alleged signals from BMW. BMW had bought Rover because its Board had doubted whether it could survive as a niche firm. then making around 690.000 cars a year. By buying Rover. it secured production of around 400,000 cars. plus the Land Rover business. Having abandoned this strategy. can BMW now survive on its own? Major losses had resulted from trading Rover group products in the previous years (e.g. 32 billion lost in writing dovm the value of Rover assets in 1999 alone). The strong pound had provided added problems. making Rover group exports progressively less competitive in its major euro-zone markets. One of Rover group's key assets. Land Rover. was to be replaced by an own-brand product. which was much cheaper to produce (fewer basic platforms required}. Land Rover could therefore be sold. raising useful revenue. Underlying all this was the conviction that volume car-production will be Increasingly in the hands of only a few producers. given the huge scale economies involved. BMW will increasineg focus on niche markets. selling quality care leg. acquisition of Rolls-Royce label from Volkswagen) at premium prices. Today. giant rms dominate the industry to an even greater extent than they did in 1994. Only Honda. PSA Peugeot Citroen and BMW remain as smaller independents. Of those. BMW is the smallest. at around a third the volume of the others. BMW plans to remah in Britain. moving production of its new Mini from Birmingham to a modernised plant in Oxford. It also has a brand new factory in the Birmingham area producing engines for BMW models produced in the UK and overseas. Continuing good relations with the UK government. workers and consumers would still seem important for BMW. Questions 1 What poiitical problems were raised by the sale of Rover? 2 How might a more systematic approach to political risk analysis have influenced the outcome for BMW