Honda takes up 20pc stake in Rover cars

THE GUARDIAN, By Patrick Donovan Industrial Correspondent

Honda the Japanese motor manufacturer, is taking a 20 per cent stake in Rover Group, Britain's last remaining independent volume car manufacturer, in a deal which will create at least 1,300 jobs and will pave the way for a joint assault on the European car market after trade barriers are pulled down in 1992. In return, Rover, bought for £150 million by British Aerospace more than a year ago, has been given a 20 per cent holding in Honda's British car-part manufacturing business. The deal concludes 10 years collaboration between the two companies and is seen as an important coup for Honda as it provides the opportunity to manufacture cars in Britain.

The Rover Group chairman, Sir Graham Day, said the jobs of his 38,000 workers would remain secure and the company would remain independent. He refused to comment on whether any money was involved in the minority share exchange as full details have not been agreed. Both companies were "now going steady". The deal brings the total planned investment in Britain by the three largest Japanese car companies to £1.8 billion, creating more than 16,000 jobs in the motor manufacturing and supply industries. Honda's main rivals, Toyota and Nissan, have established car factories in Britain ready for a European sales drive.

The partial merger ends months of speculation about the long-term future of Rover which has been searching for a been having talks with Italian car maker, Fiat, over the possibility of producing a hybrid replacement for the Metro and Uno. Honda plans to employ 1,300 extra workers to build a car manufacturing plant at Swindon, Wiltshire, in a £300 million expansion, producing 100,000 new Honda-Rover cars by 1992. The cars will replace Honda models now imported from Japan, the partners say. The industry expects the new plant to produce a replacement for the Metro. Honda yesterday refused to reveal details about the design.

Honda plans to use as many parts as possible from British manufacturers and aims to reach 80 per cent local content within 18 months of commercial operations. Sir Graham said:

"For anyone to suggest that this will lead to Honda eventually taking over Rover is codswallop and totally inconsistent with what's been arranged. I see it as a vote of confidence by Honda in the UK, and in Rover Group, and a tribute to the efforts of Rover's management and workforce in restructuring that company to meet the exacting standards of today's market place."

Sir Graham said the first Honda cars should be rolling off the production line at Swindon by about 1991, with the new Rover and Honda possibly being produced by 1993 or 1994. The new Rover made by Honda would "be the type of car that would be consistent with our new upmarket strategy," he said.

"The new car will be entirely separate. It won't be a successor to anything."