BMW to unravel Rover-Honda tie

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BMW plans to move quickly to reduce Rover's dependence on parts it buys from Honda, a move that threatens not only Rover's 15-year relationship with the Japanese car maker but also the future of Honda's engine factory at Swindon.

Representatives of BMW, in looking over Rover's books in the run-up to its takeover bid, concluded it had been overpaying for parts. 'We are quite angry about this,' a senior BMW executive said. 'There is a lot of dependence that we want to change. We know we can supply many things a lot cheaper than Honda.'

Sources close to Rover confirmed that it had decided a year ago that it wanted to reduce its dependence on Honda engines. Last year, Rover bought 70,000 Honda engines, worth about pounds 50m. Most came from the Swindon factory, which in turn depends heavily on Rover as a customer.

However, Honda executives believe they would have the upper hand if BMW attempts to unwind the tight licensing arrangements between Honda and Rover.

Rover is developing versions of its own K-Series engine, which could replace the bought-in Honda 1600 units used in the Rover 216 and 416.

The Swindon factory made 77,000 engines last year, and Honda says it will make 200,000 in 1995, but the maximum capacity of its adjoining car assembly plant is 100,000 units.

The senior BMW executive said the Rover-Honda ties 'need to be changed'.

Rover runs away, pages 2-3