Honda assures its access

Press, 19 April 1979, Page 13

Honda assures its access

KENNETH GOODING, of the “Financial Times. London, writes of the impending' merger of Britis Leyland and Honda.

European car manufacturers have with a little bitterness, some dismay and a modicum of surprise at the news that British Leyland is to collaborate with Honda of Japan. The surprise was about the timing rather than that the Japanese had chosen the United Kingdom as a base from which to operate in Europe. It has been widely expected that the Japanese would find a way of setting up some kind of manufacturing operation in Europe, either in a "neutral” country like the Netherlands, which has no major local car maker to protect, or in the United Kingdom which is the volume market with the weakest national automotive business —B.L.

As one Continental executive put it: “It makes sense for the Japanese to attack Europe’s car industry through its soft, underbelly. And that is 8.L.”

The Japanese have been acutely aware for some time that their direct exports to Europe are under some threat. Last year Japanese cars accounted for over 6.5 per cent of the 10 million or so new cars registered in 'Europe. It has been generally assumed that the total couid be pushed to 10 per cent before there was some retaliatory action. On a broader front, the European Commission believes that the E.E.C. may need to consider imposing retaliatory curbs on “selected” Japanese exports — with cars and electronic goods being prime candidates — later this year unless Japan does considerably more to reduce

its trade surplus with the Community during the next few months. This was one of the main conclusions of a gloomy report “leaked” in Brussels which blamed the lack of

progress in trade negotiations on the intractable national character of the Japanese, whom it described as “workaholics.” All the signs are that, as Mr Giovanni Agnelli, Fiat’s chairman, has said often in the past, the world could split into three main trading blocks — Europe, the Americas and the Far East — all protected by huge tariff barriers. Only those manufacturing inside the barriers will be able to maintain reasonable market shares. And market share is extremely important if a volume car business is to remain profitable. It takes two to make a bargain, however, and although collaboration with B.L. offers Honda a solution to the looming future problems in Europe, the United Kingdom group also has much to gain. B.L.’s moat pressing problem is its need for new- models to replace its ageing Austin-Morris volume car range. The new “Super Mini” is promised at the eno of the next year, but a replacement for the Marina in the Vital mid-range segment of the market — and the one on which sales to fleet customers is heavily based — will not be available until 1983 at the very earliest. B.L. for the moment seems not to be short of . cash; the major constraint on speeding up the project is its lamentable lack of engineering resources. Mr Michael Edwardes pointed out recently that the group, in comparison with some other manufacturers, has only one-third the number of engineers per model line. "The problem is one

which has built up over the years because B.L. reflects the endemic problem of British society, which has traditionally undervalued the contribution of the engineer.” Meanwhile the Marina, in its recently face-lifted version, ia just aboui holding its own at the moment in its home market against really tough and much more modern competition like the Ford Cortina, Vauxhall’s Cavalier, the Peugeot 305, the Renault RlB and others. But, as one of B.L.’s man dealers suggested, "the Marina will have lost a hell of a lot of market share by 1983.” B.L.’s other medium car, the Allegro, is already out of favour because its shape has proved unattractive. If the indications from Japan turn out to be right, B.L. could be assembling a mediumsized car to replace the Marina, the Allegro and possibly the Triumph Dolomite, by 1981. It would be a car based on Honda designs. Mr Edwardes has frequently made the point that B.L. needs its volume car business because without it the specialist car division. Jaguar, Rover, Triumph, would find life difficult and B.L.

would lose many of its dealers to importers. And the volume car business stands a better chance of survival with a new mid■ange car sooner rather .han later. Supporters of a deal with Honda will argue tha. anything which preserves B.L. as a volume car maker and helps rebuild its home market share must be good for the United Kingdom automotive industry generally and for the estimated one million people in Britain who directly and indirectly rely on the group for their livelihood. Notwithstanding the negotiations with Honda, B.L. will continue to search for international partners who will collaborate on component development and manufacture, like the gearbox development being discussed with Renault. The cost of bringing new components on stream is so high that B.L. needs co-operative agreements right across its range of vehicles, from small cars to the largest trucks. But it was being suggested last week that the European companies most likely to have been interested in component collaboration with B.L. might in future be less willing to establish a link. “After all, B.L. is the Trojan Horse bringing the Japanese manufacturers to Europe,” said one critic.