Government Forced on Defensive Over Inward Investment Policies Amid Honda-Led Criticism

The UK Government was placed on the defensive yesterday as Honda, the Japanese car producer, sharply criticized British Aerospace's (BAe) decision to sell Rover to BMW, warning that the move would undermine Japanese investment in Britain. Honda's executive vice president, Yoshihide Munekuni, arrived in London for crisis meetings with Rover and BMW, as the company's 20% stake in Rover was reduced from the proposed 47.5% under Honda's bid to an outright sale of its 80% stake to BMW for £800 million.

Honda's executives expressed outrage at the lack of consultation and what they perceived as a disregard for the British car industry's long-term interests. Industry Minister Tim Sainsbury attempted to downplay the situation, assuring potential Japanese investors that Britain would continue to welcome their investment. However, Honda officials suggested that they would disentangle themselves from Rover, potentially complicating the partnership between BMW and Rover.

Honda's concerns about the sale have echoes in the broader industry, with some predicting that this development could deter future inward investment. Britain had been attractive to investors due to its strong business environment, but this latest move raises questions about the Government's commitment to long-term partnerships.

Some 180,000 cars were exported from Britain last year, a significant milestone for the industry.

Key Takeaways:

• Honda has denied any plans to increase its stake in Rover, choosing instead to stake its claim at 20%.
• Industry Minister Tim Sainsbury attempted to reassure potential Japanese investors, saying Britain will continue to welcome their investments.
• Honda executives expressed outrage at the lack of consultation and perceived disregard for the British car industry's long-term interests.
• Andrew Jones, plant director at Honda UK, described the situation as "very bad" for the British car industry.
• Honda officials suggested that disentangling from Rover would be complex but necessary, given joint development plans with Rover and future dealership networks.

Statistics:

• 40% of European inward investment is attracted to Britain, according to the Government.
• 182,207 vehicles were exported from Britain last year, exceeding Rover's 161,932.
• £800 million is the price agreed upon for the sale of BAe's 80% stake in Rover to BMW.
• Honda's 20% stake in Rover would have risen to 47.5% under the proposed joint agreement.
• 20% of shares is now owned by BMW in Honda's Swindon factory.

Sources:

• Sainsbury, T. Industry Minister.
• Jones, A. Plant director, Honda UK.