Hondabishi May Be Around The Corner

ARE HONDA AND RIVAL AUTO maker Mitsubishi merger-bound? Despite the companies' vehement denials, that's the buzz among Tokyo auto watchers. The union would make sense. Honda is a powerhouse in the U.S. market, while Mitsubishi is all over Asia. Their combined product line would range from Honda motorcycles to Mitsubishi trucks. Together, they would vault over Nissan Motor to become Japan's No.2 auto maker, with combined fiscal 1995 sales of $76 billion, vs. Toyota Motor's $83 billion and Nissan's $60 billion.

Predictions of a Honda-Mitsubishi marriage aren't new, but they were revived by the spring megamerger announcement of Bank mf Tokyo and Mitsubishi Bank. Why? Mitsubishi Bank is the main bank for both companies and holds nearly 5% of the shares in each, while Bank of Tokyo also owns a chunk of Honda. In Japan, banks traditionally play the role of matchmaker. Other circumstantial evidence: Honda has been asking analysts, such as James Capel's Matthew Ruddick, for their reports on Mitsubishi. And there's room at the top at Honda, as if there was some anticipation of big management shifts. Its chairmanship has been vacant for two years.

With 11 players, some consolidation is inevitable for Japan's auto industry. Mergers, unpopular in Japan, have nevertheless been rising of late, up 7% in 1995's first half, reports Daiwa Securities.

Skeptics note that mergers are usually last-ditch efforts of small, troubled companies. Honda and Mitsubishi are both healthy. Big corporate news is often spread in advance as rumor so everyone can adjust. For example, the bank merger was rumored for years before it actually happened.