SWINDON, UK - Honda and Rover have not yet renewed any of the key supply contracts between them that end late next year.
Each supplies the other with engines, and Rover supplies body stampings to the Honda Accord.
Rover is unlikely to renew its purchase of 60,000 1.6- and 2.3-liter Honda engines. Rover is building its own new engine plant. Honda has not decided whether it will continue to buy body stampings and 5,000 2.0-liter turbodiesels a year from Rover.
'The Accord, which has been in production since 1992, may be replaced about that time, so that we no longer need the pressings from Rover,' said Honda UK President Toshio Ishino. 'This may result in new contracts, or it may not. The whole thing is in a state of transition with no one prepared at this stage to reveal their total strategy.'
Honda may continue to do key component business with Rover after current supply contracts end. BMW acquired Rover three years ago, and Honda was angry. Honda had owned a minority share of Rover, which it has since sold.
Rover and BMW want to use common components. Ishino said Rover may not be free to renew its collaboration with Honda. 'Rover is looking to its future with BMW, and if Rover cannot supply what we need, we may undertake manufacture ourselves, or we may organize new suppliers.'
Ishino said that even if the supply contracts end, business will remain strong. Honda may have lost the contract to sell 60,000 engines to Rover, but it expects to build engines for a new customer. It will supply engines to its own new joint-venture Civic assembly plant being built in Turkey.
Plans to introduce a Civic wagon version and to expand capacity at Honda's Swindon plant from 100,000 to 150,000 cars a year by the end of 1998 are well advanced, said Ishino. This will bring investment at Swindon to $1.6 billion.
Capacity could be expanded to 170,000 units. This would be achieved by manufacturing efficiencies and a second shift rather than by expanding the plant further. However, 60 hectares of the site - a former airfield - are not yet occupied by factory buildings.
Sixty percent of Honda vehicles sold in UK are built there. Fifty percent of those sold in other EU markets are built in the UK. The EU-sourced content of cars built at Swindon is almost 90 percent.
Unit sales in the EU will total 221,000 this year against 200,000 units in 1996. The target is 300,000 units by the year 2001.
'We have put our suppliers under pressure to improve their quality - our quality depends on theirs. We do not like to get rid of suppliers. We regard them as partners, and we prefer them to improve, not to cease to supply us.'
Ishino quoted the case of a UK-based supplier whose component failed to align properly during assembly. Two Swindon workers, whose job it is to install the component on the assembly line, were sent to the supplier's factory. They explained the problem and proposed how to overcome it.
'This is a tangible example of what we mean by partnership,' said Ishino. 'We do not just say: 1/8You must improve your quality.' We help.'