Euro Debate
January 1st 2002 was E-day. The day that 12 prominent European groups finally brought their currencies together as one. The debate as to whether to join the Euro for the UK had been fierce. The UK had negotiated an opt out clause in the Maastricht treaty of 1992 and the current Labour Government has always said that it will hold a referendum on the subject when the economic climate is right. So how has this affected MG - Rover over the last decade? In an article in the Guardian Newspaper dated July 12th 2002, Kevin Howe the chief executive of Rover called for the Government to join the Euro, arguing that the weak Euro and the strong pound were seriously hampering MG - Rover's efforts to return to profitability. In addition Mr Howe also suggested that falling sales in Europe were as a result of the Euro making prices uncompetitive. Excluding the UK Rover saw its sales in Western Europe fall from 34318 in the first six months of 2001 to 23428 over the same period in 2002 (a 32% drop).On top of this we are seeing a number of larger manufacturers moving their production facilities to the continent for the same reason. Rover was only saved from being moved to Hungary by BMW due to Government intervent
The graph below demonstrates the converse relationship between car sales and the interest rate set in the UK. Some industry insiders are predicting that this could be the final nail in MG Rovers Coffin. Within an environment increasingly turning against the Internal Combustion Engine it is unlikely that the company could even begin to contemplate developing alternatively powered vehicles. However these events occurred more than 10 years ago. This will have a massive impact on MG-Rover in terms of the costs of developing the new technology within the cars to reduce emissions and also in redesigning its production facilities in order to meet these targets. It should adhere to the regulations but has been impacted little over the last ten years. The Economic Environment was therefore a direct contributor to the performance of Rover at this time. For example the new Ford Focus cost L3 Billion to develop and took 6 years. So what is the government doing to slow car registrations and to promote the use of public transport? Firstly their investment in rail networks is stunning in its size. The company built the Rover 75 to fit the new company taxation system but its smaller vehicles (a significantly growing market) are over 10 years old and uncompetitive in the market place hence adding to declining sales. ) Technological· Acceleration of new technologyThe advance of technology over the last ten years has been phenomenal. · Car manufacturers are tied to new EU laws based on emissions from both products and factories. During the last decade or so carmakers have been able to fix different price levels in different EU countries (e. These regulations make designing and receiving type approval for a car incredibly expensive and complex. A small drop in GDP is seen as a large drop in car sales with long recovery times.
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