The English patient proves terminal for BMW's top pair

At 10 o'clock last Friday night, BMW's gleaming headquarters in Munich was still ablaze with lights, with the company's familiar, blue and white symbol still proudly in place on the roof. As the snow fell outside, only the top two floors of the "four-cylinder", as the building is known, were dark and silent.

A few hours earlier, one of the most extraordinary and turbulent supervisory board meetings in German motor manufacturing history had reached its unhappy end. BMW, for many years a model of German industrial excellence, had unceremoniously sacked its chairman.

But Mr Bernd Pischetsrieder was not the only senior manager to go; Mr Wolfgang Reitzle, the man responsible for BMW's spectacularly successful development of new models, left the company after 20 years. Prof Joachim Milberg, a mild-mannered man who is almost unknown outside the motor industry, became chairman of a board that had been transformed within hours.

As BMW's top brass drove home through the snow, junior managers speculated about what the changes would mean for the Bavarian car maker. And what would now happen to Rover, BMW's British subsidiary - and the cause of all of Mr Pischetsrieder's woes?

The genial, bearded chairman had already cleared his desk before Friday's supervisory board meeting began. Despite repeated denials earlier in the week, Mr Pischetsrieder knew that he was fated to take the blame for Rover's massive losses, which may have been as high as 1.8 billion deutschmarks (€920 million) last year.

Mr Reitzle made no secret of his view that the chairman's job should be his and insiders report that the atmosphere on the top floor of the "four cylinder" became so poisonous last week that Mr Pischetsrieder began referring to his rival as a "regicide".

Mr Pischetsrieder acquired Rover in 1994, just a year after he became BMW's chairman and he continued to champion the British company long after most of his colleagues lost faith in it, arguing that more investment could make its antiquated factory at Longbridge, near Birmingham, profitable.

But the secretive Quandt family, which owns almost half BMW's shares, was determined to stem the flow of losses at Rover by replacing Mr Pischetsrieder with the tougher Mr Reitzle. When the chairman of the supervisory board, Mr Eberhard von Kuenheim, was informed of the family's wishes, he called Friday's meeting in the hope of effecting a quick succession.

The board's 10 investors' representatives and its 10 employees' representatives agreed immediately that Mr Pischetsrieder should resign. But when Mr Reitzle outlined his plan to cease production of all Rover cars apart from the Mini, the Land-Rover and MG models, the union representatives declared that he was unacceptable as chairman. Mr Reitzle's plans would mean the loss of most of Longbridge's 14,000 jobs and would threaten a further 36,000 jobs among British suppliers.

The investors could have pushed through Mr Reitzle's appointment - as chairman, Mr Von Kuenheim can cast two votes if the supervisory board is deadlocked. But the 49-year-old development manager knew that he could only realise his plans with the support of the workforce and he tendered his resignation with immediate effect.

Prof Milberg, a 56-year-old expert in production techniques, is seen by most industry analysts as a transitional chairman - not least because all top BMW executives are obliged to retire at 60.

"The English patient," as Rover is known to BMW managers, has been in intensive care throughout the five years since the Bavarian company acquired it. The investment of more than 2 billion deutschmarks in the Longbridge plant has done little to make Rover's workers more productive or their cars more popular.

BMW managers are forbidden to talk about Rover during flights from Munich to Birmingham but insiders estimate that the British company loses an average of 5,000 deutschmarks on each car it produces. Some 140,000 Rover cars - one third of its total production - remain unsold and Rover's share of the British car market has fallen from 12.8 per cent in 1994 to 4.6 per cent today.

More worrying still for BMW, confidential quality reports on the new Rover 75, which has already been delayed by several months, conclude that it is not yet ready to hit the road.

Mr Reitzle, who was passed over as chairman in favour of Mr Pischetsrieder in 1993, predicted from the beginning that the acquisition of Rover could prove to be a disastrous mistake. In March 1996, he warned that, unless BMW changed its strategy, the British subsidiary could cost the Bavarians DM13 billion by 2000. Dismissed at the time as a horror vision, Mr Reitzle's prediction now looks almost certain to come true.

Mr Reitzle called for Rover's successful, high-quality brands - Mini, Land-Rover and MG - to be incorporated into BMW's own distribution network as niche products. He suggested that the rest of Rover should be sold to a mass producer such as Ford or General Motors.

But Mr Pischetsrieder insisted that Rover could become a successful brand, producing a full range of cars and offering BMW a chance to break into the mass market. Most of his senior colleagues supported the chairman's strategy but when news of last year's record losses at Rover became known in January, nerves at the "four cylinder" began to fray.

Some 120 top BMW managers fly between Munich and Birmingham every week, costing the company more than 50 million deutschmarks in air fares alone. More importantly, managers complain that the effort to solve Rover's problems is preventing them from focusing on key BMW projects, such as the development of the new 7 series.

The new chairman has the advantage of being one of the most popular figures in BMW, as much at ease on the shop floor as the top floor. But a warm personality may be little help to Prof Milberg as he attempts to tackle the poisoned legacy of Mr Pischetsrieder.

Rover workers at Longbridge are relieved that Mr Reitzle has left the scene and the British government has been quick to assure BMW that a decision to save Rover will be rewarded with generous government subsidies.

But the problems that led to Mr Pischetsrieder's departure remain as pressing as ever and Prof Milberg is under intense pressure to stem the flow of cash from Longbridge.

The Quandt family attempted to install Mr Reitzle as chairman in the hope of extricating BMW from its commitment to Rover. It is unlikely that the family feels any more warmly towards the British subsidiary now that Mr Reitzle has gone and the mild-mannered professor may yet be obliged to wield the axe.

The Quandts insisted this week that, contrary to stock market rumours, the family remains committed to maintaining BMW as an independent company. However, there is no guarantee that this commitment will remain firm in the face of generous offers from car giants such as Ford and Volkswagen who would delight in easing the burden of BMW from the family's shoulders.

Mr Bob Eaton, the joint chairman of Daimler-Chrysler, said this week that, although his company would not be bidding, he expected that at least three offers would immediately be on the table for BMW.

Mr Reitzle will not be short of offers either; as the genius behind BMW's product development, he would be a welcome addition to any carmaker's board. He is friendly with some of the leading players in the German motor industry, including Daimler-Chrysler's Juergen Schrempp and Volkswagen's Ferdinand Piech.

According to German newspaper reports yesterday Mr Reitzle has already been offered a job by Ford which would put him in charge of European strategy for a number of brands including the recently-acquired Volvo.

As for Mr Pischetsrieder, he can console himself this weekend with the prospect of a 15 million deutschmark pay-off - and the knowledge that the English patient is somebody else's problem at last.