Honda to Buy Stake in British Car Firm, Plans Joint Venture
In a move designed to circumvent the threat of stiff European trade barriers, Honda said Thursday that it will buy 20% of the Rover Group, one of Britain’s old-line car companies, and will build an assembly plant in Britain to produce small cars for the European market by 1992. Honda thus will become the first Japanese auto maker to acquire a significant stake in a European auto company.
Honda said it will spend $490 million on its new British operations, both to expand a previously announced engine plant and to build the assembly plant in Swindon, England, which will eventually produce 100,000 Honda and Rover cars a year to be sold throughout Europe. Rover, best known in the United States for its Land Rover utility vehicles, will own 20% of the joint venture that will produce the cars.
Honda’s expansion into Britain, following its highly successful entry into production in the United States, is part of a broader move by the Japanese auto industry to establish a manufacturing presence in Europe before 1992. That’s when the nations of the European Community plan to remove internal trade barriers; most observers expect the countries to simultaneously erect stiff trade barriers against products from non-member nations.
Japanese Prefer Britain
For Honda, the investment in Rover is likely to help reduce the political friction that may result from an expanded Japanese presence in Europe. Honda officials say they want their British-built cars to have 80% European content, which would qualify them as domestic cars rather than imports under the European guidelines. A Honda spokesman said the stake in Rover will make it easier to meet such tough requirements by enabling Honda to tap into Rover’s network of parts suppliers.
Britain has become the preferred location for Japanese companies setting up shop in Europe in anticipation of 1992. Nissan already has a plant in England. Toyota recently announced plans to build an assembly plant there and it reportedly plans to build an engine plant in Wales.
While Britain has attracted Japan’s Big Three, France, meanwhile, has apparently failed in its efforts to land one of Japan’s smaller auto companies. Fuji Heavy Industries, the maker of Subaru cars, reportedly just dropped plans to build cars for the European market in a plant south of Paris.
But Honda has gone a step further than its Japanese rivals by forming close ties with an existing British auto maker. In fact, Honda and Rover already have extensive joint operations in England. In an old Rover factory managed by Honda executives, the two companies produce the Honda-designed Sterling. In another Rover plant, the two companies are scheduled to produce the Honda Concerto and the Rover 800 starting this fall.
