[mallumowgli]

One main reason why I did not like Hero Honda and bought a Bajaj was because of my perception that they did not do anything of their own. And if Honda pulled the plug I think HH would flounder. Whats the point in having a JV and being in the market for so long, if you cannot stand on your own feet??? This is not the way Tata, Mahindra and Bajaj became what they are today. They may not be the biggest (like HH is) or the best, but I feel they are far far better entities than Hero Honda

Same reason, I use to hate Maruti Suzuki also, when they were a 50-50JV. The GOI did not even think of having an R&D for Maruti during those days. Now that MS is hundred percent subsidiary of Suzuki, it doesnt matter!!

[buddha]

Here is some news from today which complicated the matter further:
Honda Eyes Slice Of Munjals' Auto Comp Biz | VCCircle

Both partners are holding re-alignment talks, which, sources added, may be critical to the continuation of the JV. Recent media reports have suggested that Munjals, who started off with bicycle components trading six decades ago, and Honda, the second largest automobile maker in Japan, are on the verge of breaking the JV Hero Honda.

"There is a lot of posturing on both sides at the moment," said one source, who did not wish to be named. This is not the first time the collapse of Hero Honda JV has been predicted, as speculations preceeded the renewal of the partnership in 1994 as well. The 20-year pact signed then is coming up for renewal only in 2014, but the developing situation could be more complex this time.

I find it strange that they are mixing up three different issues while making their decision (whether to stay together, whether to let Hero Honda export, whether Honda should buy into Hero Auto components). In an ideal world the strategies for each would be independently defined, but I guess this is how it works in reality! Having said that, I think even if the auto comp + export move goes through, it will only push the divorce date a bit into the future. Eventually Honda is bound to want to break up, for reasons GTO pointed out.

[BusyBoyKK]

As part of my XMBA I presented an Accounting case on HH's balance sheet and cash flow.
The information I could analyze was the HH stock in India is one of the top dividend payer. The stock price also multiplied many folds. So, it's an investors paradise. However, the cash flow seems to be diverted to some mutual funds by the Hero group. It certainly did not go back to the HH legal entity. For the % share both groups have, they have reaped a lot of money in the form of dividend payouts.
Just by looking at the numbers and with little observation of the product line / life cycle it was clear that HH will be split eventually.
Either Munjals are not much interested in forming / running a motor cycle company (read in the lines of Ranbaxy) or on a total diagonal side they could tie-up with a major automobile company using the investor good will and the cash out of the mutual funds. I think, this is already running in their brains and once the JV-split is official then you can hear some other tie-up press statements.
Honda will take the cash home and invest in 2 wheeler R&D. I was told by my professor that Honda entered US market decades ago claiming they would want to launch 2 wheelers. But they launched 4 wheelers before 2 wheelers.

[anjan_c2007]

And the parting is final now.Honda is set to exit with all of its 26% equity in the 26 year old partnership with HH.The number 26 repeats twice here!
Today's The Tribune, Chandigarh, gives the news here on this link:

The Tribune, Chandigarh, India - Business

The news gives details about HH setting up newer and newer plants with Rs 500 crores and so on and about its production capacity of 50 lakh units and so on.
There is no news about R&D investment or thinking on those lines by the Hero group, which may emerge as a dodo with its old Honda technology and with nothing technical coming from Honda in future.
Shows a lack of vision by the Hero Group.
Am reminded of the Titanic sinking in the James Cameron film and the band of energetic violinists still enthusiastically playing their instruments!

[Newpunter]

Yes the news is confirmed now. However, it seems like Honda will continue to supply engines and technical support to Hero till the end of their current agreement which is 2014. Seems like Hero has some time to set up their own facilities and R&D or tie up with another company ( or even takeover some company ) . I think all is not lost for Hero, but I hope people will atleast now stop buying an overpriced Hero Honda bike just due to the name.
Honda, on the other hand will now concentrate completely on its own subsidiary so, competition will be tough for both Hero, Bajaj and TVS. Honda will also make around 1.2 Billion $ from the sale of the stake in Hero Honda.

Originally Posted by anjan_c2007

The news gives details about HH setting up newer and newer plants with Rs 500 crores and so on and about its production capacity of 50 lakh units and so on.
There is no news about R&D investment or thinking on those lines by the Hero group, which may emerge as a dodo with its old Honda technology and with nothing technical coming from Honda in future.
Shows a lack of vision by the Hero Group.

The new plant with 500 Crores is being setup by Honda and not the Hero Group. But yeah, seems like Hero Group didn't want to invest anything in R&D and only wanted to squeeze as much profits as possible from their reputation without investing much.

[GTO]

Originally Posted by anjan_c2007

And the parting is final now.Honda is set to exit with all of its 26% equity in the 26 year old partnership with HH.The number 26 repeats twice here!

Just shows to show why we should take PR talk with a large helping of salt . After all that Hero Honda denied....

There is no news about R&D investment or thinking on those lines by the Hero group, which may emerge as a dodo with its old Honda technology and with nothing technical coming from Honda in future.

Hero could set up their own R&D, and this is something I'd personally prefer (remember the Chinese proverb : "teach a man to fish"?). However, I doubt Hero has it in them, after so many years of being spoon-fed technology by Honda. Their corporate culture would have gotten complacent. On the other hand, it won't be too difficult for them to find another technological partner, considering their massive hold over the Indian market.

[Newpunter]

They do have an R&D unit but the only Research they do is on how to change the paint job for their next version .

[Gansan]

As their own ad tag line read years before, "it is the Honda in it that makes it a Hero"! I won't go anywhere near them for my next bike once they part ways. And I think there are many like me.

But I feel they will get to retain the base models like Splendor, CD 100 etc as alimony. This will keep the momentum going for some time, as not every buyer will be aware of facts. These two are formidable names in the 100 cc segment. Similar thing happened when TVS and Suzuki parted ways - they were given the Fiero as a parting gift and milked it for quite a while. They still do, in the name of Apache.

But without Honda, I predict they will be reduced to also ran status in five years. Their bikes will sell, but they will be nowhere near the top position in the market. Even if they buy out a hand to mouth Italian or Taiwanese bike maker, nobody in India today will buy a bike simply because it is foreign, if it is an unknown entity. Many people of my generation bought a hero-honda in the early years because we could not buy the real thing then. Now everyone can. Escorts got over ambitious and re-badged the Yamaha RX 100 as Escorts RX 100 in the late 80's, failed miserably and hurriedly brought back the old badge within a couple of months.

[Pri2]

Looks like Hero and Honda have finally parted ways today.

Breaking its 26-year old joint venture - Hero Honda, Munjals-promoted Hero Group, on Thursday, said it will buy the entire 26 per cent stake of its Japanese partner Honda in the company for an undisclosed amount.

More info here and here.

[anjan_c2007]

Can put it as one of the risks for Indo Jap joint ventures:
Kinetic- Honda parted
DCM-Toyota parted
Eicher - Mitsubishi parted
Allwyn- Nissan parted
Believe one should not be very dependent on them all the while for technology transfer but develop one's own R&D.
26 years is a pretty long period of togetherness of the two- Hero and Honda and it has been simply foolhardy for the Hero Group to be spoon fed all the way!!

[aaggoswami]

1) The biggest question is what amount will Hero end up paying to Honda for the 100cc engines that are virtually unchanged and basically still date back to 80's and 90's ?
Already to the best of my knowledge, royalty was being paid to Honda group.

2) The future of Hero group is a bit unstable IMHO. They will have to pay money on one hand and on the other hand try to get in touch with another manufacturer or start their own R&D. Going in for another manufacturer is an option, but whom ? Peugeot or Vespa seem to be an OK option atleast as of now.

3) The real matter is that Hero group never bothered about its own R&D the way Bajaj did. Of course, Bajaj has built its reputation using Kawasaki, but they went in with their own R&D. The products which came out were ahead of their times. This is what Hero is late in doing. The sooner they start, the better.

Here is an article from ACI.

Source : Hero Honda finally part ways | Autocar India

Article :

Japanese auto major Honda Motor Company has officially declared that it will sell its stake of its Indian 2-wheeler JV with Hero Motors.

Both Hero Motors and Honda have agreed to and signed MOUs for a new relationship. Following the signing of the MOUs, a joint press conference was held in New Delhi, with Mr. Brijmohan Lall Munjal, the Chairman of Hero Honda, Mr. Pawan Munjal, the Managing Director and CEO of Hero Honda; Mr. Sunil Kant Munjal who represented the partners; and Mr. Fumihiko Ike, Managing Director and Chief Operating Officer for Regional Operations (Asia & Oceania) of Honda.

Based on the consent established by the MOUs, Honda will sell all of the Hero Honda shares it currently holds, which is 26% of Hero Honda’s outstanding shares, to the partners. Honda and Hero Honda will sign a new licensing agreement which enables Hero Honda to continue producing, selling and servicing its current products. Hero Honda will change the company name. The brand name will gradually be shifted from the current ‘Hero Honda’ to the new name. Honda will also grant new licenses for new products which will be produced and sold under the new brand name.

Hero Honda was established in 1984 with a 26% investment by Honda and 26% investment by the partners with the purpose of developing the motorcycle market in India, and started operations in 1985. The company is known for its popular models like the CD100, Splendor, Passion and Karizma.

Honda will still give out new technology, so why did the split in the first place ? May be Honda can get more from license fees ?


EDIT:
Add TVS-Suzuki also to the list. But TVS and Suzuki worked as hard as possible to make the split as less painful as possible.

[HammerHead]

Lets see if Hero can repeat what TVS or Bajaj did post breakup with Suzuki and Kawasaki respectively. Personally I never believed in Hero Honda products and I always believed TVS and Bajaj is a better bike maker then Hero Honda.

[anjan_c2007]

The new brand name is HERO. That was expected.The HH share has got a bullish run on the bourses last week. The reason is that the management has allayed fears of investors saying that the company will gain by paying only a reduced royalty to Honda. There is no royalty outgo involved after 2014.
And the huge untapped export market was not accessible according to the HH honchos who blame it on their MOU with Honda that prevented such commercial overtures. So the Munjals say that the reduced royalty outgo and the prospect of an export market should be good news for the health of the new Hero Motorcycles Ltd.

[anjan_c2007]

Honda has decided to offer management positions in HMSIL to the repatriated executives who were on the Hero Honda management till now. The President of HMSIL is also leaving for the parent company in Japan after his four year tenure comes to an end here at HMSIL.
Honda's (HMSIL) foray into the 100cc segment is expected by 2012 with a India -specific model that is on their design boards.This is expected to make deep inroads into the urban and rural Indian bike market.
The combination shall be quite a tough challenge to Hero Honda, as the executives so repatriated back to Honda and then posted to HMSIL would have a thorough knowledge of all the manufacturing, sales, marketing strategies that Hero Honda has been possessing and adapting.
Hero Honda should better wake up and gear itself to face the tough competition.

[anjan_c2007]

Here is a hilarious link that makes a spoof of the separation of the two, 2 wheeler biggies.
CONVO LINK - CLICK HERE

Mods please delete the post if this is off topic.