Abandoned History: When BMW and Volkswagen Threw Hands for Rolls-Royce and Bentley

More than 25 years ago now there was a brutal business battle between two of Germany’s Big Three. At the conclusion of the 20th century, both BMW and Volkswagen were very eager to purchase Rolls-Royce and Bentley. The two British luxury stalwarts had been intertwined via the same owner for many decades, but that was about to change. The fight took five years to play out, saw neither company get exactly what it wanted, and changed the fortunes of both Rolls-Royce and Bentley for the better.

First, some business history. Rolls-Royce is one of the oldest active car marques, dating back to 1906 when it was established as a luxury car manufacturer. Independently owned, it had a decade-plus head start on Bentley which was not established until 1919. Unlike Rolls-Royce and its stately luxury cars, Bentley started off as a racing car company, and competed in the Indianapolis 500 in 1922.

Like so many small brands at the early part of the 20th century, Bentley was always low on cash. Its finances were ruined by the stock market crash in 1929 and subsequent Great Depression. The final straw was the failure to make payments on two mortgage loans, which sent the company into bankruptcy in July 1931.

A financial firm called British Central Equitable Trust made an offer to purchase Bentley’s assets for £125,000 (£7.4m adj.) in November that year. Bentley signed the paperwork and then met the new owners: Rolls-Royce Limited. The bidding entity was just a front to conceal who’d made the offer. From there, Bentley Motors Ltd. was a subsidiary of Rolls-Royce Limited.

Rolls-Royce was independent until 1971, when its aerospace division went into bankruptcy. Its aerospace assets were reorganized into Rolls-Royce (1971) Limited, and the car division became Rolls-Royce Motors Holdings Limited. Both were nationalized entities under the British government. Remember this entity distinction, as it comes into play later.

Rolls Royce (1971) Limited and its aerospace assets were a nationalized entity until 1987, when the company was renamed to Rolls Royce plc. The government turned it into a stock company via an IPO, and its shares were sold to the public. This separate entity still exists today and makes jet engines.

The government held onto Rolls-Royce Motors until 1980, when it was sold to Vickers PLC. Vickers itself was a collection of leftovers after the nationalization of Vickers-Armstrongs, which went bankrupt in 1977. The new Vickers owned Rolls-Royce Motors, and some defense and engineering business. Rolls-Royce and Bentley were run by Vickers for the next two decades.

In the early 90s BMW showed some interest in Rolls and Bentley, and attempted to buy a partial stake from Vickers but Vickers declined. However, BMW began to provide engines and components for both Rolls-Royce and Bentley later in the decade. Vickers did not have the funds to create newer and more modern engines for its vehicles as the times changed. The company’s only engine was the 6.75-liter V8 which traced its roots to 1959.

In 1998 there were indicators from Vickers that it wanted to sell off its assets, and quickly. BMW and Volkswagen were both very interested in making a purchase. Vickers and its shareholders took a short recess to consider both offers, and ultimately sold Rolls-Royce Motors to Volkswagen for £430 million (£839m adj.) in June 1998 (remember this date). It turned out BMW’s offer was only £340 million (£663m adj.). 

In the deal, Volkswagen received the physical assets of Rolls-Royce and Bentley, including the factories, body designs, the Spirit of Ecstasy hood ornament, and the waterfall grille used on all Rolls-Royce cars. However the deal was far from finished, and there was a small problem.

Though Vickers could sell the Rolls-Royce and Bentley assets to Volkswagen, it did not own two key pieces of the transaction: the Rolls-Royce name or logo. The British government had given the Rolls-Royce trademark to the Rolls-Royce (1971) Limited entity which was by then Rolls-Royce plc, the public aerospace company.

In the documents of Rolls-Royce plc there was a stipulation: If the Rolls-Royce Motors company was ever sold, Rolls-Royce plc would maintain the key trademarks of the brand, the name and logo. Volkswagen needed to obtain those final two pieces of Rolls-Royce or it couldn’t build any cars. They reached out to Rolls-Royce plc.

But Rolls-Royce plc didn’t care to hear Volkswagen’s request. The company had recent joint technical ventures with BMW that were successful, and had already sold what VW wanted. They licensed the Rolls-Royce name and its interlocking “RR” logo to BMW for £40 million. “Take that, Volkswagen.” said BMW. BMW already created a new company with its Rolls asset in March of 1998, called Rolls-Royce Motor Cars Limited. A legal battle ensued with what must have included thousands of documents.

The Volkswagen Group owned Rolls-Royce and Bentley physically but couldn’t build any Rolls-Royce cars. And BMW owned the Rolls name and logo which it couldn’t actually use because it didn’t own any body design elements. The two firms negotiated and came to an agreement after two tense months.

Volkswagen would own Rolls-Royce and Bentley for five total years. During that time BMW would lease the Rolls-Royce name to Volkswagen, and provide the engines and systems for the cars Volkswagen would build (mostly the Arnage and Silver Seraph). There’s no word how much BMW charged for this lease, if anything. 

After the five years were up, on January 1, 2003, VW and BMW would have no further joint actions on Rolls-Royce and Bentley. Rolls-Royce ownership of its name and trademarks would go to BMW, and Bentley would stay with Volkswagen. Rolls-Royce Motors as an entity then ceased to exist, and its assets were then owned by Bentley Motors Limited. It was later learned that VW was much more interested in Bentley than Rolls-Royce because of its higher sales volume potential. 

There was an additional challenge for BMW, because none of the Rolls-Royce physical assets were part of the deal. Perhaps as a jab from Volkswagen for making their life difficult the past few years, BMW would have to create a new Rolls-Royce product from scratch. They received no production facilities, no engines, transmissions, components, or chassis that already existed at Rolls-Royce. 

However BMW knew this would be the case, and had prepared in advance. The resulting first BMW-created Rolls-Royce impressed: It was the Phantom of 2003, and it was ready immediately upon the transfer of Rolls ownership. BMW has grown Rolls-Royce sales from 796 in 2005 to 5,712 in 2024. Under VW stewardship, Bentley sales increased from just 792 in 2003 to 10,600 in 2024. 

There was one final piece of the asset puzzle, the Vickers entity that caused all these issues when it sold Rolls-Royce to Volkswagen as an incomplete package. In a call back to the past, Vickers was purchased by Rolls-Royce plc in 1999. A quarter century later, it’s all just Abandoned History.

[Images: BMW, Volkswagen, Rolls-Royce, Bentley]

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