In June 1999, the UK government unveiled details of a financial aid package worth GBP 152 million to secure the future of the BMW-owned Rover plant at Longbridge. The government's financial support is linked to productivity targets. At the same time, BMW executives announced plans to invest a total of GBP 3.3 billion in its loss-making Rover subsidiary.
On 23 June 1999, the trade and industry secretary Stephen Byers announced details of a GBP 152 million aid package to secure nearly 9,000 jobs at the Rover car plant at Longbridge near Birmingham. Rover is owned by the German-based motor manufacturing group, BMW. The package is made up of GBP 129 million from central government as "Regional Selective Assistance", supplemented by a local contribution of GBP 23 million from Birmingham City Council, the local Training and Enterprise Council and the new Regional Development Agency. The central government component will be phased over six instalments, ending in 2004, and is linked to the achievement of productivity guarantees by the company.
The aid package, outline agreement on which was announced at the end of March 1999 (UK9904100N), follows months of uncertainty over the future of Rover, including substantial job losses and radical changes in working practices (UK9812168N) and changes at senior management level within both BMW and Rover. Confirmation of the aid package was accompanied by the announcement of GBP 3.3 billion of investment by BMW in its Rover subsidiary over the next six years. A substantial proportion of this is earmarked for redeveloping the Longbridge plant to produce a new Mini and a new medium-sized model to replace Rover's 200 and 400 series. BMW/Rover executives are now reported to be pursuing proposals for further improvements in productivity and flexible working arrangements with trade union negotiators.
Mr Byers said that the "ground-breaking" aid package was based on the recognition that "for jobs to be secure in the long term they need to be based on investment, productivity and skills." As well as directly protecting the jobs of Rover employees, the deal will also indirectly support an estimated 50,000 jobs among Rover suppliers in the West Midlands. Trade unions welcomed the confirmation of the deal as a turning point in Rover's prospects, and undertook to cooperate with BMW to achieve productivity improvements.
However the financial package agreed between the UK government and BMW still requires approval from European Commission authorities responsible for monitoring state aid. The Commissioner responsible for competition, Karel Van Miert, is reported to have warned that "nothing can be taken for granted". One issue concerns how genuine was the possibility of BMW building the projected new medium-sized car in Hungary as an alternative to investing in Longbridge.