Honda puts brake on Rover ties and reviews pounds 400m deals: Japanese car maker's review of pounds 400m contracts fuels job fears for 33,000 workers

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HONDA yesterday began severing links with Rover in the wake of BMW's pounds 800m takeover of the company by terminating the cross-shareholding agreement the car makers have had since 1990.

The Japanese company also announced that it was reviewing all contracts with Rover, worth about pounds 400m a year, to create a more independent European operation. The announcement casts doubt on a 15-year partnership which rescued Rover from collapse and revolutionised its operations and model range.

It came after a 90-minute meeting in Tokyo between Honda's president, Nobuhiko Kawamoto, and the BMW chairman Bernd Pischetsrieder - their first encounter since the German firm's surprise purchase of Rover from British Aerospace last month. Although the BMW chairman described the talks as amicable, Mr Kawamoto immediately announced that Honda will exchange its 20 per cent holding in Rover for Rover's similar stake in Honda's Swindon plant.

Rover played down the threat to jobs for its 33,000 workers and car plants - at Longbridge and Solihull in the West Midlands and Cowley in Oxford. 'General business and collaborative arrangements are not affected by this decision. They will continue,' it said.

A spokesman added that during the talks, also attended by John Towers, Rover's managing director, both sides had agreed 'not to do anything to damage the other's interests'.

A Honda UK spokesman also played down an immediate end to collaboration, saying he hoped the companies would proceed with the pounds 500m development of a new medium-sized car due to enter production this year.

'I do not believe we would act in a Western way and pull the rug from under Rover,' he added. 'It will be a phased withdrawal in the interests of both companies, not an acrimonious one. To do otherwise would be cutting off our nose to spite our face.'

Honda supplies Rover with 70,000 engines a year and most Rover cars are Honda designed and built under direct licence. Rover manufactures about 18,000 Honda Concertos a year and supplies body panels to Honda's Swindon factory, where production will reach 100,000 next year.

Honda's tantrum, page 17

Business as usual, page 25

View from City Road, page 26