Honda to decide next week if it will sever ties with Rover

THE INDEPENDENT
MICHAEL HARRISON, Industrial Editor
Thursday, 3 February 1994

HONDA is expected to decide early next week whether to abandon its partnership with Rover following the pounds 800m sale of the British car maker to BMW of Germany. A taskforce of senior executives from the Japanese car maker began work yesterday, assessing whether it is worth maintaining the relationship in light of the German takeover.

The team, headed by Yoshihide Munekuni, executive vice-president of Honda Motor Company and its representative on the Rover board, is due to report back to the main Honda board in Tokyo after the weekend. BMW's chairman, Bernd Pischetsrieder, still plans to fly to Japan next week in an attempt to persuade Honda's president, Nobuhiko Kawamoto, to continue the partnership although no date has been set for a formal meeting.

Shojiro Miyake, president of Honda Europe, said yesterday: 'Now is the time for cool heads and sensible thinking. We will review our situation internally and then move forward. This must be done behind closed doors, not in the public arena.'

Although clearly still angry about the sudden sale of Rover to BMW after 15 years of collaborating with Honda, a spokesman said nothing was to be gained by the two sides 'hanging out their dirty washing in the press'. No announcement about Honda's intentions is expected until after the meeting with BMW. However, there is a growing feeling that the Japanese car maker will decide on a gradual pull-out.

The cross-shareholding agreement whereby Honda owns 20 per cent of Rover Group and Rover owns 20 per cent of Honda's UK manufacturing plant in Sweden could be unravelled speedily. This would also entail the repayment by Rover of pounds 30m in cash to Honda. But industry sources believe it could take three to five years to dismantle the joint manufacturing agreements built up since Rover and Honda first began collaborating.

Honda is currently supplying Rover with 125,000 engines a year for its entire range of models, from the 200 to the Rover Sterling. Most of the components are built in Swindon but some, such as the V6 engine, are imported from Japan.

Rover, in turn, manufactures body panels for all the Honda Accords built at Swindon and has agreed to supply body panels for the Honda version of the successor to the Rover 200/Honda Concerto. The car, codenamed Theta by Rover and the HH by Honda, is due to enter the production stage late this year.

Rover also manufactured about 18,000 Concertos under licence at its Longbridge plant in Birmingham last year. The area of collaboration least likely to be affected is Honda's agreement to distribute the Land Rover Discovery in Japan, badged as the Honda Crossroad.

Output from Swindon is now running at 50,000 cars a year but is due to rise to 100,000 once the HH reaches full production. A further 600 workers are to be recruited by the end of this year, taking the workforce to 2,000.