BMW to Increase Stake in Rolls-Royce to 10%

ROLLS-ROYCE PLC
25 October 1999


  Rolls-Royce to Assume Full Control of BMW Rolls-Royce
                      Joint Venture

     BMW to increase its stake in Rolls-Royce to 10%
                            

Rolls-Royce plc ('Rolls-Royce') the aerospace, marine and
energy group, and BMW AG ('BMW') announce today that they
have  reached  agreement  on  a  repositioning  of  their
strategic   relationship.  Rolls-Royce  will  take   full
control  of BMW Rolls-Royce GmbH ('BMW Rolls-Royce')  and
BMW  intends  to increase its equity investment,  through
further  market purchases, in Rolls-Royce  to  just  over
10%.  The two companies also intend to cooperate in areas
such   as   research  and  technology,   purchasing   and
logistics.

BMW  Rolls-Royce,  formed in 1990 as a joint  venture  to
develop the BR700 series of engines for the corporate and
regional  airline  sector, has been  notably  successful.
Four  aircraft applications, all sole-source,  have  been
secured  and the company has won orders worth  more  than
DM4bn.   Its engines power both of the world's new  long-
range executive jets (the Gulfstream V and the Bombardier
Global Express) and have recently entered service on  the
Boeing  717,  the first new generation 100-seat  regional
aircraft.   Nimrod  2000,  the  Royal  Air  Force's   new
maritime reconnaissance aircraft will be powered by BR710
engines.   BMW  Rolls-Royce delivered about  100  engines
last  year and this is expected to increase to more  than
210 in 2000.

Rolls-Royce  has  established a leading position  in  the
corporate   and  regional  airline  sector  through   the
development of the Tay engine, the acquisition of Allison
in  1995 and now the consolidation of the BMW Rolls-Royce
joint  venture.  The acquisition of Allison brought  four
new  engine  types  into  the  Rolls-Royce  civil  engine
portfolio  on seven platforms and several light  aircraft
applications.  The BMW Rolls-Royce consolidation will add
an  additional two engines powering a further three civil
platforms.

Based  on  current forecasts, after record deliveries  of
around  1060  Rolls-Royce civil engines  in  the  current
year, civil deliveries will grow to approximately 1120 in
2000,  1200 in 2001 and 1250 in 2002.  The deliveries  in
2002  will  include more than 120 Trent 500 engines,  the
sole power plant for the new A340-500/600 aircraft.   The
consolidation  will increase the total Rolls-Royce  order
book from approximately £10.3bn to £11.6bn.

Rolls-Royce  believes that the market for  corporate  and
regional aircraft will continue to grow significantly and
that   Rolls-Royce  will  now  be  even   more   strongly
positioned  to secure new engine deliveries  and  capture
aftermarket  revenue.  In addition, sole  ownership  will
enable  Rolls-Royce  to  align better  BMW  Rolls-Royce's
product  strategy, marketing and research and development
with  the  wider  Rolls-Royce Group; these  measures  are
expected  to  generate cost savings of  around  £20m  per
annum by 2001.

Rolls-Royce  will  issue  33.3  million  new  Rolls-Royce
shares to BMW and BMW will acquire a risk & revenue share
in the BR700 programme.

BMW  intends to broaden its participation in gas  turbine
power  systems  by  increasing its equity  investment  in
Rolls-Royce  to just over 10% by buying approximately  90
million  existing  shares subject  to  price  and  market
conditions.  BMW has stated that it has no  intention  of
making a general offer for Rolls-Royce.

Including  the transactions announced today,  Rolls-Royce
will  have  made a net investment of approximately  £500m
over  the  past  decade  in  BMW  Rolls-Royce,  of  which
approximately  £210m  has been  expensed  over  the  same
period.

The  impact  of  today's announcement  will  be  earnings
neutral   for  Rolls-Royce  after  the  amortisation   of
goodwill, in the first year.

'BMW  Rolls-Royce  is at a stage of development  with  the
BR700 series where today's changes benefit both companies.
We   can  fully  align  the  business  with  our  existing
aerospace  operations to achieve operational and marketing
efficiencies; BMW retains a direct interest in  the  BR700
series and, at the same time, broadens its exposure to the
power systems business through its 10% investment in Rolls-
Royce.   We   welcome  this  increased  investment   which
demonstrates BMW's confidence in the future of  our  power
systems  business,'  said Sir Ralph  Robins,  Chairman  of
Rolls-Royce plc.
   
Professor  Milberg, Chairman of BMW AG said,  'It  is  our
intent to extend our strategic interest in the gas turbine
business through a significant shareholding in Rolls-Royce
and  co-operation  opportunities in important  areas.   We
will be the single largest industrial shareholder in Rolls-
Royce.     Our   increased   investment   in   Rolls-Royce
demonstrates our confidence in Rolls-Royce's strong future
in the power systems markets.'
   
Rolls-Royce  has  been  advised  in  this  transaction  by
Rothschild.

Enquiries:

Rolls-Royce                                 0171 227 9141
Peter Barnes-Wallis

Rothschild                                  0171 280 5000
Nigel Higgins
Robert Leitao

Brunswick                                   0171 484 5959
Frank De Maria


Rothschild, which is regulated in the United  Kingdom  by
The  Securities and Futures Authority Limited, is  acting
for  Rolls-Royce and no one else in connection  with  the
acquisition  and will not be responsible to anyone  other
than  Rolls-Royce for providing the protections  afforded
to  its customers or for providing advice in relation  to
the acquisition.


Notes:

1.  BMW Rolls-Royce will be run as a German subsidiary of
    Rolls-Royce, with its headquarters and operations  in
    Dahlewitz  near  Berlin and also  its  operations  in
    Oberursel  near  Frankfurt.   The  company  will   be
    renamed Rolls-Royce GmbH.

2. The  acquisition of BMW's stake in BMW  Rolls-Royce  is
   expected  to complete on 31 December 1999,  subject  to
   the approval of appropriate German authorities.
   
3. The  debtor recorded in Rolls-Royce's balance sheet  as
   at   31   December  1998  of  £135m  (expected  to   be
   approximately  £180m at completion) in connection  with
   Rolls-Royce contributing to the financing of BMW Rolls-
   Royce,  is  included  in  the  approximate  net   £500m
   investment to date.
   
4. The  estimated effects on the Rolls-Royce balance sheet
   will   be   to   increase  net   tangible   assets   by
   approximately  £50m,  goodwill by  approximately  £190m
   and   net   debt  by  approximately  £170m   (including
   consolidating  the  existing net  debt  in  BMW  Rolls-
   Royce.)   These  estimates are liable  to  change  with
   movements  in  exchange  rates, the  Rolls-Royce  share
   price,  the actual results for BMW Rolls-Royce for  the
   year  ending  31  December 1999 and  final  fair  value
   adjustments.
   
5. The  BMW  Rolls-Royce accounts for the  year  ended  31
   December  1998  showed sales of DM791m, a  loss  before
   tax  of  DM460m and net assets of DM260m.  During  1998
   BMW  Rolls-Royce  delivered 97 engines.   In  1999  the
   company  is expected to deliver around 170 engines  and
   in  the year 2000, approximately 210. This reflects the
   progress  BMW  Rolls-Royce has made from a  development
   to a production company.
   
6.    BMW  has held approximately 2% of the issued  equity
   capital of Rolls-Royce since 1990.  This investment will
   be  increased  by  the  33.3m  shares  issued  as  part
   consideration  for the 50.5% stake in  BMW  Rolls-Royce
   (valued at approximately £64m at Friday's closing price
   for Rolls-Royce shares of 191p) and by the purchase  of
   the 90m existing shares which BMW now intends to acquire.
   This will bring the total holding to just over 10% of the
   issued share capital of Rolls-Royce.

7.    Rolls-Royce plc is a global company meeting  present
   and  future  requirements of civil aerospace,  defence,
   marine  and  energy  markets,  with  facilities  in  14
   countries.  Its core gas turbine technology has created
   one of the broadest product ranges of aero engines in the
   world, with 55,000 engines in service with 300 airlines,
   2,400 corporate and utility operators and more than 100
   armed  forces,  powering both  fixed  wing  and  rotary
   aircraft.  In addition, more than 30 navies use  Rolls-
   Royce propulsion.  Energy markets include the oil and gas
   industry and power generation.

   Rolls-Royce,  a  pioneer of gas turbine technology  for
   aerospace,  power generation and marine propulsion,  is
   today  involved in the major future programmes in these
   fields,   including  the  Trent  aero  and   industrial
   engines,  the  Eurofighter  Typhoon  and  Joint  Strike
   Fighter combat engines and the WR21 marine engine.