Honda may break ties with Britain's Rover Group

February 22, 1994|By Bloomberg Business News

MUNICH, Germany -- Japan's Honda Motor Co. yesterday distanced itself from a long-term commitment to Britain's Rover Group PLC, now controlled by Germany's BMW, and indicated that it might take a go-it-alone stance in Europe.

Honda's cautious new approach became clear as Bayerische Motorenwerke AG, or BMW, agreed to take over full ownership of Rover Group by acquiring the 20 percent stake held by Honda. But that accord did not resolve the question of Honda's continued cooperation with Rover.

"The vital question is not yet answered," said Andreas Wahl, German equities analyst at Hoare Govett Securities Ltd. Analysts said that Rover's current model lines depend on Honda technology and parts.

"Honda could do BMW some pretty serious damage in the short term" if it suddenly withdrew from the contracts, said Keith Hayes, equities analyst at Merrill Lynch in London.

Honda said yesterday only that it will decide whether to continue working with Rover after future discussions with Rover and BMW.

"I'd look for a slow, orderly withdrawal," said Merrill Lynch's Hayes. Honda has the upper hand in the negotiations, but also would be a loser if the cooperation with Rover is broken off abruptly, he said.

The split between Honda and Rover could delay Honda's efforts to increase its presence in Europe by leaving Honda on its own to find suppliers and distribution channels, said Keith Donaldson, an automobile industry analyst at Salomon Brothers Asia.

Honda President Nobuhiko Kawa moto said yesterday's announcement reflects Honda's decision to rethink its strategy for expansion in Europe.

"In the future, we intend to create a more independent operation in Europe, using our own resources."

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