Nouvelles des firmes - Andrew Mair

BMW, Honda and Rover: What future for their industrial models?

Honda:

At first sight Honda's industrial model remains unchallenged, since the change only affects its European operations (which account for less than 10 percent of Honda's world-wide sales). However, if one were to consider inter-constructor relationships as a significant axis for defining an industrial model - ie the competition/cooperation axis ranging fierce competition to oligopoly and also including various forms of partnerships -which GERPISA does not appear to have done so far, but which are surely important at the macro-economic level, then the unexpected and sudden rupture is of considerable significance.

The resulting issues for Honda chiefly concern the economic (ie economies of scale) viability of its European production operations, which rely on the link with Rover to share: (a) product development costs; and in particular (b) a high-local-content components supplier base for two vehicle models when total planned production per year at Honda's factory is only 150,000. Will Honda drop Europeanized design and European production of the Accord model at the next model change (1997/8), to concentrate on the Civic, importing North American-style Accords from North America perhaps (like the current coupe and estate)? Will there be a new agreement with Rover? Despite all the media reports can we really be certain that the next Rover 600 will "definitely" be twinned with a BMW car and not a Honda?

In terms of industrial models, the challenge to Honda, then, is chiefly to its mode of internationalization in Europe and its attempt to construct a rational global company. Honda can be expected to draw on its other international resources to help resolve its new problem in Europe.

Rover:

Rover has worked hard to explicitly align its business systems to those of Honda during the 1990s, from product development processes to manufacturing logistics to factory organization. Is all this wasted? Voices within Rover do not want to lose the Honda lessons, which have not yet fully taken root anyway, but now may be at risk. BMW has claimed that it will leave Rover well alone, to function separately in operational terms. Does BMW (not just the top, but the middle management) have the self-discipline not to try to impose BMW operating systems on Rover? Will Rover be too keen to please the new master and thus drift away from focusing on properly implanting and building upon the newly acquired Honda disciplines? If manufacturing is left alone, will Rover's product development processes (now very rapid and very cheap) nevertheless drift towards BMW methods, or will the British be able to remain sufficiently independent?

BMW:

BMW claims that major savings are already being made through common parts purchasing from its 900 and Rover's 750 components suppliers, and that this is one area for intense future collaboration, as is the sharing of facilities in overseas projects (manufacturing in South Africa, training in Singapore). Collaboration teams have been set up to enable the two companies to learn about each other (also a danger for over-stretched Rover Group managers who may be diverting their attention from critical Rover projects). There are also implications for several existing BMW product development programs (small front wheel drive cars, 4WD vehicles).

More interesting from the GERPISA perspective is whether BMW will seek to learn Honda lessons from Rover (note that in the USA BMW has directly hired top American Honda managers for its South Carolina plant). Alternatively, will BMW's Bavarian-based commercial successes, which it may not itself fully understand, make it very reluctant to tamper with its industrial model (ie in the absence of crisis)? If this were the case, the purchase of Rover would, paradoxically, makes BMW less likely to revolutionize its industrial model. BMW may thus have followed the general German industrial strategy of the 1990s: protection of home-based manufacturing and their associated industrial models precisely through expanded investments abroad.

BMW claims Rover and BMW to have discovered that they have very similar business systems anyway, except in the area of long range financial planning. Closer examination would be needed to verify whether this is entirely or even largely true. BMW's raw productive efficiency must surely be very substantially lower than Rover's, indicating at least certain key differences. My own extensive visits to all the BMW factories during 1992 revealed that the same lean/"Japanese-inspired" language was being spoken. But how deeply will Rover and BMW study each other's industrial models in search of the actual similarities and differences in practices which are of such vital importance to the successful merging of certain processes involving companies which have followed such different trajectories?