VW gets the factory, but rival BMW gets the brand

By JAMES L. GRAFF

ould a Rolls by any other name smell as sweet? Hardly. For all the burred walnut paneling and hand-rubbed leather upholstery, it is the Rolls-Royce brand--and its winged symbol, the Spirit of Ecstasy--that makes the automobile such an object of desire. That is a bitter truth for Volkswagen chairman Ferdinand Piech. Two months ago he agreed to pay $780 million for Rolls-Royce Motor Cars; last week he had to submit to an agreement that after 2003, he can only sell Bentleys, the slightly sportier stablemate of the venerable Rolls.

BMW, the Munich-based carmaker that VW handily outbid to buy Rolls-Royce Motor Cars from the British firm Vickers, used some key leverage to snatch victory from the jaws of defeat. First, it produces the 5.4-liter, 12-cylinder engines for Rolls-Royce's new Silver Seraph model. The Bavarians threatened to withhold them, a power play that would have forced VW to undertake some expensive re-engineering.

More importantly, BMW's 10-year partner in manufacturing airplane engines, Rolls-Royce PLC, controls the brand name Rolls-Royce. Last week the firm announced it had sold the rights to the name for cars to BMW for the relative pittance of $65 million. Graham Morris, CEO of Rolls-Royce Motor Cars, subsequently resigned "as a matter of honor" since he had assured the firm's 2,200 employees in Crewe, England that they would still build Rollses, not just Bentleys.

For now BMW is licensing VW to produce Rollses until the end of 2002. There is a rich irony in that, of course, but perhaps not as rich as it seems. The entire automotive sector has become such a tangle of joint venture, supply and licensing agreements that no car is a purebred anymore--not even a Rolls.