Archive : Honda Raises Its Stake in Europe

DAVID E. SANGER, Special to The New York Times

In a late effort to bolster its presence in Europe, the Honda Motor Company said today that it would buy 20 percent of the Rover Group P.L.C., the British car-making subsidiary of British Aerospace P.L.C., and that it would build a manufacturing plant in Britain.

Under the agreement, announced here and in London, Rover will also acquire 20 percent of Honda’s manufacturing subsidiary in Britain. The agreement represents a new stage in a relationship that has grown steadily closer since the British auto maker turned to Honda in 1979 for help in developing new models. The companies said the value of the transactions announced today was still being negotiated.

When asked at a news conference in London whether Honda might forge links with other European auto makers, Tadashi Kume, Honda’s president, said, ”Our fundamental policy is that our collaboration with Rover is the nucleus of our car marketing strategy in Europe.”

Earlier in the day, Sir Graham Day, Rover’s chief executive, dismissed suggestions that the deal was the first step toward an eventual Honda takeover. He said that Rover was operating profitably and had been looking to strengthen its ties with Honda for the last year.

”Up Until now, we were not married, not engaged, not even living in sin,” Sir Graham said. ”Now we are going steady.”

Honda has always been the weakest of the three large Japanese car makers in Europe, and in recent months it has been under growing pressure to prepare for the unification of the common market in late 1992. The Toyota Motor Company and the Nissan Motor Company have announced plans to build major manufacturing plants in Britain, which will be used as a base for exports to other European Community countries.

Without a similar arrangement, Honda would find itself at a severe disadvantage because auto makers are being required to build cars with 80 percent locally produced content to avoid tariffs.

Honda’s plans, so far, are less ambitious than those of its competitors. The company said it would make about 100,000 cars a year at the new plant by 1994, to be sold under the Honda and Rover labels. Toyota and Nissan are each planning about twice that number.

”You may find it is small,” Koichiro Yoshizawa, Honda’s executive vice president, said of the plan. ”But it is flexible, and we may expand it later.” Under previous agreements, Rover has produced a British version of the Honda Acclaim and the Sterling, a luxury car based on Honda’s Legend. The Sterling has been sold in the United States since 1987. Rover plans to start production in the fall on the Honda Concerto, a compact sold in Japan but not in the United States.

Assigning a value to the deal with Rover is difficult. Rover was purchased from the British Government by British Aerospace for $:150 million, about $243 million at current exchange rates, and a Government commitment to inject $:800 million to pay down the money-losing auto maker’s debts. $5 Billion in Taxpayer Aid Rover had been formed by the gradual merger and nationalization of all of Britain’s primary car makers. British taxpayers poured more than $5 billion into the company to keep it afloat. Under Prime Minister Margaret Thatcher, privatizing was pursued, starting with the sale of Jaguar P.L.C. to the public in 1984.

Honda’s new manufacturing plant will be in Swindon, England, a small manufacturing city west of London. Company officials in Tokyo declined to detail which models would be produced at the plant, but Mr. Yoshizawa said the first would be a ”middle-class car.” That could mean the new version of the Honda Accord, which is expected to be introduced this fall after a major design overhaul, or some hybrid car developed by the companies. The plant is expected to employ 1,300 workers and begin production in 1991.

Today’s announcement ended speculation about how Honda, the most successful Japanese auto maker in the United States, would approach the European market. Though the company has collaborated with Rover for 10 years, the relationship has been rocky at times. Many here speculated that Honda would go its own way, building its own factory. In the past, Honda has repeatedly declined to take a stake in Rover.

But the decision to team up with Rover will probably reduce tensions in Europe over the Japanese car makers’ market. Nissan was recently involved in a prolonged dispute with the French Government, which suggested that it would count Nissan Bluebirds as ”Japanese-made” cars although they are produced in Britain. After much wrangling, the dispute seems to be over, but it provided a graphic illustration to Japanese auto makers of the degree to which they are considered outsiders in the European market.

Honda officials seemed particularly sensitive on that point today, saying that by 1994 the plant in Swindon would include 80 percent ”domestic content.” Gains for Rover

For its part, Rover may get a much-needed image boost from the strengthened alliance with Honda. The company has relied on products like the Range-Rover and Land Rover and the Sterling to refurbish its image. But it has yet to recapture the magic of its old nameplates: Austin, Morris, Triumph and MG. The Sterling has been something of a disappointment, particularly in the United States.

The announcement of the alliance was praised in the House of Commons by Lord Young, Britain’s Minister of Trade and Industry, who called it ”a further step in the renaissance of the United Kingdom’s motor industry.” Opposition spokesmen voiced qualms, with John Garrett, a Labor member, saying that Britain was becoming ”a Japanese offshore island.”

Keith Adams

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.