BMW saves face as Japanese quit: German car maker maintains it is business as usual as Honda signals end to fruitful link with Rover

BMW yesterday put a brave face on Honda's decision to scrap its cross- shareholdings with Rover, saying that it expects business between the two to continue as usual.

'We perfectly understand Honda's motives in wanting to end the cross-shareholding with Rover. But this is purely a financial move,' a BMW spokesman said. 'It does not affect Honda's current business cooperation with Rover, which we would like to see continued.'

According to BMW, there was no suggestion at yesterday's meeting in Tokyo between Nobuhiko Kawamoto, Honda's chairman, and Bernd Pischetsrieder, the chairman of BMW, that the Japanese wished to terminate licensing and technical agreements abruptly.

'We have no confirmation of the reports claiming that Honda wants to end the business links,' the spokesman said. The German company said there would be discussions between BMW, Honda and Rover, but no dates had been set.

Most analysts in Germany felt that it was only natural that Honda should wish to unravel its 20 per cent stake in Rover, and Rover's 20 per cent stake in Honda UK, following BMW's acquisition of an 80 per cent stake from British Aerospace last month. But they believe that any premature attempt to break up the commercial links would make little sense for either side.

'It is to be expected that the two will soldier on with their existing links for the time being as an overnight break-up would be very damaging for both parties,' Bob Barber of James Capel said.

Deutsche Bank's car analyst, Klaus-Jurgen Melzner, expects Honda to phase out its contractual agreements over the next two years as BMW gradually introduces its own technology into Rover production processes. 'To do this immediately would be far too expensive for BMW, while for Honda's part, I cannot imagine they would want to keep up the links for too long,' he said.

But the timing of Honda's announcement appears to have been a calculated attempt to humiliate the Germans while they were in Tokyo.

The statement outlining the dissolution of the cross-shareholdings was the carmaker's first response to what is seen in Japan as a severe loss of face. It followed the meeting between Mr Kawamoto and Mr Pischetsrieder, who had flown to Tokyo to inform Honda of the German company's plans for Rover.

In retrospect, Japanese car industry analysts say Honda probably took the decision to pull out shortly after it learned of BMW's intention to take a controlling stake in Rover Group. But to gain maximum impact, the Japanese appear to have delayed the announcement until they could deliver it to Mr Pischetsrieder's face.

The statement also said: 'The series of contracts now existing between Honda and Rover will be reviewed in future business discussions.' This ambiguous wording, which neither threatens to end Honda's collaboration with Rover nor confirms that it will continue as normal, seems designed to heighten BMW's unease while avoiding any direct insult to Rover.

BMW said it will exchange the 20 per cent stake in Honda UK it owns through Rover for Honda's 20 per cent share of the British manufacturer. Analysts said the value of the two stakes would be similar, so that little money would change hands.

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