BMW and Honda to Meet Over Future of Rover Car Production

Strategic Insights -

The CEOs of BMW and Honda, Bernd Pischetsrieder and Nobuhiko Kawamoto, respectively, are set to meet to discuss the future of car production at Rover Group PLC, in which BMW now holds a majority stake. The meeting, which may take place as early as this week, is expected to be a crucial moment in determining the fate of the British-based car manufacturer. Analysts predict two possible outcomes: a tense international dispute or the formation of an unprecedented multinational car production effort.

Key Takeaways:

  • BMW's acquisition of an 80-per-cent stake in Rover for $1.2-billion (U.S.) has been met with skepticism by Honda executives, who fear that BMW's active management of the company will undermine their long-term efforts to establish Rover as a British company with its own brand identity.
  • Honda and Rover have a 15-year history of close collaboration, sharing management, assembly facilities, and suppliers, with many Rover models employing Japanese-designed components.
  • The BMW buyout is the latest in a series of blows to Japan's auto industry, which has been hit by slumping sales and U.S. pressure to open its market wider for U.S. cars and parts.
  • Despite Honda's claims that its European strategy is not in disarray, the company is reviewing its business plan in light of the BMW acquisition.
  • Rover is the only European car company to have shown an operating profit in 1993, with a pretax profit of $84-million on sales of $6.5-billion.

Statistics:

  • Honda sold 157,000 autos in Europe in 1993, and projects sales of 181,000 units for 1994.
  • BMW's acquisition of Rover valued the company at $1.2-billion (U.S.).
  • Rover's pretax profit in 1993 was $84 million on sales of $6.5 billion.

Sources:

  • The Globe and Mail, Tokyo, Japan
  • By Edward Neilan Special to The Globe and Mail