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Rover moves a step nearer to merger

3 October 1991

By Patrick Donovan and Judith Jackson

Three new Rover cars are to be launched in a £600 million production programme, as the embattled British Aerospace subsidiary yesterday moved another step nearer full merger with the UK operations of Honda.

Amid warnings that Rover's 37,000 workers must increase output by nearly a third, the partners announced plans to extend last years collaborative agreement to include all Rover Group car products. New models are expected to include a long awaited replacement for the 11 year old Metro. Land Rover, the Rover Group's most profitable operation, is not included in the deal. The move, part of former chairman Sir Graham Day's strategy for Rover's future, builds on last years cross-shareholding deal.

Its timing was seen as an attempt to demonstrate to the City that the BAe subsidiary had already drawn up a long term strategy. Analysts yesterday speculated that the decision to announce closer links represented a clear sign that Rover "could stand on its own feet" in the event of a break up bid for BAe.

Longbridge will produce a new model based on the 200 series, as well as a completely new range expected to replace the 11 year old Metro design. At Cowley, £130 million is to be invested into starting production of Honda's new £15,000 Synchro model.

The deal with Honda, signed simultaneously in Britain and Japan yesterday, will also see a £50 million investment in tooling and pressing technology at Honda's Swindon plant, making it the main supplier of body parts for British built Honda's. Closer collaboration could also pave the way for further pooling of technology and setting up a joint European supply base to maximise economies of scale, Rover said.

Rover Group chief executive George Simpson said the deal was "very, very significant strengthening of the links" between the two firms. The programme was particularly good news for Cowley, although it would not affect capacity cuts and job losses already announced at the plant, he said. The new models would not result in significant increases in jobs or production capacity, but would mean greater job security for existing staff and greater use of Rover's manufacturing capacity of about 400,000 cars a year.

John Allen, chief negotiator for the Amalgamated Engineering Union, said: "This is wonderful news and shows a confidence in a workforce that produces quality products."

The move follows Rover's offer to its workforce of a Japanese style "New Deal" to achieve necessary productivity increases.
Rover said the collaboration in manufacturing and purchasing, together with Honda's support in the training of Rover personnel , was designed to support Rover's initiatives.

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