UK: Vickers' valuables. (2 of 4)

UK: Vickers' valuables. (2 of 4) - While the Gulf war was a positive factor for the tank business, the same is not true for cars. Bernard Tobin, Rolls-Royce managing director for Europe and the Middle East, explains: "Since 15 January, sales have slowed

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Last Updated: 31 Aug 2010

While the Gulf war was a positive factor for the tank business, the same is not true for cars. Bernard Tobin, Rolls-Royce managing director for Europe and the Middle East, explains: "Since 15 January, sales have slowed right down in the Middle East. I anticipate a very gradual pick-up in the next nine months to perhaps 60 to 70% of last year's total." In Kuwait itself there is little hope of business picking up before the end of the year, but Tobin is hopeful about replacement sales in the longer term.

The company reacted swiftly to the darkening sales picture, reducing output and making 600 redundancies from its Crew factory's 4,500 workforce. But Sir David is adamant that "nothing must be done that could damage the marque". Thus research and development has been kept up and everything possible done to maintain the position in the marketplace. Nevertheless, Sir David has warned that the cars' contribution to profits will be insignificant in 1991; given that in 1990 the division's share of operating profit, including contributions from Riva and Cosworth (seven months), was over 50%, Vickers' earnings will be down from last year's pre-tax of £96.5 million on turnover of £778.1 million, perhaps to under £70 million.

It is in conditions like these that Sir David believes it is vital for Rolls-Royce to be part of a larger group. Rolls believes that the longer-term outlook is promising. Like other Rolls-Royce men, Tobin sets great store by the success of the Bentley marque in the 1980s, which saw it develop its own market distinct from that of Rolls-Royce. In the early 1980s Bentley was all but dead: in 1980 only 171 vehicles were sold, out of a total of 2,800. Last year it accounted for over half of the company's sales.

The revival was the work of Peter Ward, then Rolls-Royce sales and marketing director, now its chairman and chief executive and a main board director. He hit on the idea of taking a Rolls body and adding Bentley styling to it to produce a car that would appeal to a wider, slightly younger audience. Says Tobin: "We realised that the 'notoriety' of the Rolls-Royce brand placed a limitation on it for some customers who don't wish to be recognised."

The ploy worked. The resulting Bentley 8 and Turbo R have drawn sales from the likes of Mercedes. Now the company has developed a new star. The Bentley Continental R, which goes into production in November, is the first totally new design to come out of the Crewe factory in 10 years and the first new Bentley since 1952. A sleek coupe, intended to be driven, the car is a classic in the Bentley tradition. At a price of £160,000, only 280 will be produced for 1992, to be divided equally between the UK, the US, the Far East, Europe and the Middle East. Already salesmen are rubbing their hands together in glee, like so many small boys.

Rolls-Royce's experience in marketing its cars will stand it in good stead with Riva, the luxury powerboat builder acquired from Schroder Wagg for £11 million last year. Based on the shores of Lake Iseo in Italy, Riva has built a reputation for quality similar to that of Rolls-Royce and includes among its customers the King of Thailand, Sean Connery and Brigitte Bardot.

While its activities were profitable, "the problem", says Peter Gittings, Riva's planning manager on secondment from Rolls-Royce, "was that turnover was not growing by any margin over inflation." Some 58 boats were built in 1990, generating a turnover of £20 million, divided equally between the Mediterranean, Japan and the rest of the world. It is from the huge US market, however, that future growth is expected. Although Riva was owned by an American company between 1970 and 1985, the approach to marketing there had been half-hearted. Says Gittings: "There had been no marketing manager for 10 years. The US market had been allowed to rise and fall with the fortunes of the dollar. If the dollar was low it was not considered worth trying to market the boats there." Vickers intends to use its extensive customer lists in the US to reach potential customers for Riva.

Back in Italy the boat builder is being encouraged to develop its range. Says Gittings: "Part of the sales process is to keep the product alive, adjust it and resell it. This had been overlooked" - a lesson learnt with Bentley. A new "runabout" is being launched at entry level, while investment in a new shipyard on the Mediterranean will allow the range to be extended with larger boats of over 20 metres.

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