UK: THE BRITISH CAR IS DEAD, LONG LIVE THE BRITISH CAR.

UK: THE BRITISH CAR IS DEAD, LONG LIVE THE BRITISH CAR. - The Rover sale is only a footnote in the history of an industry that has been recreated in a different form, says Andrew Lorenz. Ford may disagree that the UK has gained from the Japanese arival b

by
Last Updated: 31 Aug 2010

The Rover sale is only a footnote in the history of an industry that has been recreated in a different form, says Andrew Lorenz. Ford may disagree that the UK has gained from the Japanese arival but the benefit to British component makers is uncontestable. There is a growing tend towards globalisation of component supply. Without a strong R and D base, the roots of revival will be shallow.

Late on Saturday, 29 January, as he settled down to sleep in a small mountain hotel in the upper Bavarian village of Ascha, George Simpson at last permitted himself a moment of reflection. An hour earlier, Simpson, chairman of Rover group and deputy chief executive of its parent company, British Aerospace, had finally completed the sale of Britain's last remaining large-scale carmaker to BMW - the Munich-based manufacturer of upmarket cars and motorbikes. Accompanied by Dick Evans, BAe's chief executive, Simpson had signed a deal with BMW's chairman Bernd Pischetsrieder under which BMW agreed to buy Rover on an unconditional basis for £800 million. The deal gave both BAe and BMW what they wanted: for BAe a clean exit from Rover, which it had bought in September 1988 from the British government but which, only three years later, it had secretly decided to sell. As for Pischetsrieder, the takeover bought him a world-leading four-wheel-drive manufacturer - Land Rover - at far less than what it would have cost to build his own four-wheel-drive brand. It also gave him access to a company which, thanks to its 13-year collaboration with Honda, had direct experience of the Japanese manufacturing methods that BMW's high-cost German operations needed to emulate. And it removed a competitor that was starting to encroach on BMW's product territory.

But Simpson recognised the takeover's wider significance. After almost 25 years with Rover and its antecedents - the British Motor Corporation, British Leyland and BL - the Rover chairman knew that the deal represented the end of the line for the UK car industry. 'I felt sad about the nationalistic thing - Britain's last major carmaker and all that,' Simpson said later. 'And I was sad about Honda: Rover would not be where it is today, being able to do the kind of transaction we had just done, had it not been for the tremendous input we have had from Honda. But business is business and one has to get the best and strongest business for the 33,000 Rover employees. All the time, that was my major concern.' As an epitaph for almost 100 years of British industrial history, it was typical Simpson: succinct, dispassionate, and supremely objective. The same could not be said for most of the protests that erupted once the deal was announced the following Monday, 31 January. Rover was hailed as a huge success story. BAe was presented as a callous owner interested only in pandering to the City and promoting its share price (which, indeed, shot up by more than 33%); and BMW as an odious foreigner. Most curious of all, perhaps, was the enormous sympathy shown to Honda, which was portrayed as a victim of perfidious double-dealing between BAe and the Germans. In reality Honda - led by Nobuhiko Kawamoto, the company's president - had been given every chance to reach an agreement which would have met BAe's objective of eventually divesting Rover, while shutting out BMW.

As details of the Rover-Honda relationship emerged in the wake of the BMW sale, so finally and completely did a wider reality. The deal's critics were right: it was a landmark in the history of the UK car industry. But only in the sense of ownership transfer was it the kind of milestone that they imagined - the loss of the last significant British carmaker. In all but name, Rover had surrendered its independence long before. For the best part of a decade, its destiny had been controlled by Honda, which had effectively colonised the British company. All Rover cars except the Metro and Mini were based on Honda engineering; Rover paid Honda substantial fees for the floor-pans and engines, together with a royalty on each car sold. Moreover, Honda dictated Rover's marketing rights: Rover was not allowed to sell its new 600 saloon in America, where it could have taken sales from the Japanese company's version, the Accord. Honda, as one Rover executive remarked, had the British company under its thumb.

The great exception was Land Rover, which was both highly profitable and relatively untouched by the Honda influence. Land Rover might still be British had Rover not needed the four-wheel-drive operation to protect the future of the loss-making cars business. A management buy-out attempt in 1987, led by Tony Gilroy, Land Rover's then chief executive, was rejected by Sir Graham Day, the Rover chairman. Gilroy left, and, when Simpson succeeded Day, he integrated the two operations, cars and Land Rover, into a single organisation.The cleverness of the move - protecting the 80% of Rover workers employed on the cars side - was highlighted when Pischetsrieder expressed his first interest in Rover in the spring of 1993. The BMW boss asked Simpson whether Land Rover was for sale; Simpson told him no. It was either the whole of Rover or nothing.

Far from jeopardising Rover, BMW's decision to buy the whole company should secure its future. Despite its undoubted achievement in restoring the pride of its employees and the quality of its product, Rover cars was congenitally loss-making and, without the support of a Honda or a BMW, completely unviable. All its new models, up to and including the 600, were funded by the Government under the terms of Rover's sale to BAe. Even today, the extent of the financial imbalance between Land Rover and Rover cars is unrecognised, because their respective results are never disclosed. Last year, Rover reported an operating profit of £56 million. But Land Rover, whose annual sales were about £1.3 billion - only one-third of the group total - is reckoned by experts to have made profits of well over £150 million. That means Rover cars lost almost £100 million in a fairly buoyant market.

Under Honda, there would have been a big question mark over the future of Longbridge, the Birmingham factory which is Rover's biggest car plant and builds the high-volume 200 and 400 series, as well as the Mini, Metro and the K-series engine. Honda would almost certainly have used Cowley, where the 600 and 800 are made. But the expansion of its own factory in Swindon would have increasingly endangered Longbridge.

The long-term threat to Rover's capacity and jobs is not entirely removed by the BMW takeover, but it is enormously reduced. As its 100% owner, BMW has a vested interest in doing all it can to make the operations more successful.

On the face of it, BMW's first big decision was a negative.

Pischetsrieder halted development of Rover's all-new Metro, which was to have been launched next summer. It was a hybrid, stemming from the contradictory pressures imposed by financial exiguity and the need to replace a model dating from the late 1970s. The price of simply buying a Honda small car was too high, so the best Rover could do was to base the new Metro on a Rover 200 floor-pan, even though that still put Rover further in hock to the Japanese. BMW, which is more interested in a Mini replacement and had no desire to create a new debt to Honda, took one look at the project and cancelled it. The old Metro will be rechristened R100 when the revamp appears in January, and left to run down.

Cancellation of the new Metro - the last car that Rover had any pretence at self-designing from top to near-bottom - is a footnote to the postscript that the BMW takeover of Rover constitutes in the history of the British car industry. As Professor Garel Rhys of the Cardiff Business School notes: 'The end of the British car industry occurred long before the sale of Rover. It started in the late 1960s with the failed merger of Leyland and British Motor Corporation to form British Leyland, and it met its nemesis in 1975 when the Labour government had to take it over.' BL was the British volume car industry - and by the time the Thatcher government arrived in 1979, it was effectively bankrupt.

The Rover takeover was a reminder of that industrial disaster. It was almost as if the BL fiasco had been forgotten, that people in Britain had started to believe the myth that a national car industry still existed. Then came the Rover sale to BMW and stark reality broke in. But in the same moment that the Rover sale confirmed that the British car industry was dead and buried it also highlighted the rebirth of the car industry in Britain.

In one sense, the sympathy felt for Honda over the Rover sale was justified. Britain does owe Honda - and its arch-rivals Nissan and Toyota - a huge debt of gratitude for reviving its car manufacture. Thanks largely to the addition of their capacity - Nissan at Washington in Tyne and Wear, Toyota at Burnaston near Derby - UK output is now recovering fast from the nadir of 1982, when output slumped to 890,000 cars. Last year, car production climbed to almost 1.376 million, its highest level since 1974. By 1997, Rhys estimates, about 1.8 million cars may be produced in Britain - the highest number in a single year in its history. Early in the next century, if the Japanese expansion proceeds as many expect, Nissan, Toyota and Honda combined could be making one million cars in Britain, out of a total approaching 2.5 million.

This expansion is already narrowing Britain's trade deficit in cars and vehicle components, which hit a horrendous all-time peak in 1990 of no less than £4.18 billion, almost a quarter of the national balance of payments deficit. Rhys estimates that in 1997 or 1998, Britain will have a trade surplus in cars for the first time since the early '70s. 'The outlook is pretty bullish,' says Colin Whitbread, European motors analyst at Swiss Bank Corporation. 'After the decades of decline, you sometimes have to pinch yourself to believe that this really is happening.' It will not just be thanks to the Japanese, of course. Ford, the biggest car and component maker in Britain, has run an internal UK trade deficit since 1980 and was more than £1 billion in annual deficit during the late 1980s. But it is expected to narrow the gap considerably thanks to efficiency improvements at its Dagenham, Halewood and Southampton factories. In March, Jac Nasser, then chairman of Ford of Europe, said that the British plants had overtaken their German counterparts in total cost-efficiency. Much of the UK factories' improvement is due to their lower production costs - the result of the pound's devaluation after its departure from the ERM and the high cost of operating in Germany. But Nasser and Albert Caspers, who took over from him as chairman, said Britain had also closed the productivity gap with Germany.

This is a significant achievement. Less than five years ago, it took almost twice the number of hours to build a Fiesta at Dagenham than at its sister plant, Cologne (more than 50 hours per car, against less than 30 hours). Two years ago, the gap was still 27%. At Halewood in 1989, it was taking more than 60 hours to build an Escort against less than 34 hours at Saarlouis in Germany. Two years ago, the gap was smaller: more than 40 hours a car at Halewood against just over 30 hours at Saarlouis - making each British Escort about £195 more expensive to produce. But now, Caspers said, the physical productivity gap is down to single-digit percentage points. 'If you extrapolate the trend curve, that difference won't last very long,' he added. And in power train manufacture - engine and transmission - it has almost disappeared. Between them, Ford's Bridgend and Dagenham plants provide two-thirds of the company's engines in Europe.

The British plants still have some way to go before matching Ford's Valencia operation, which benefits from more modern facilities and costs that are even lower than those in the UK. But so long as Halewood and Dagenham sustain their improvement, their chances of long-term survival are now good. Alex Trotman, head of Ford's worldwide operations, declared last October that he wanted to retain the company's 'structural capacity' in Europe, 'so that we can react to a big upturn.' Halewood, built in the early 1960s, had only itself to blame for the threat to its survival during the recession, when Ford seriously considered closing the assembly facility at the Merseyside factory because of its poor performance. Dagenham was a somewhat different case. Its productivity and quality had improved steadily after Bill Hayden, then Ford's manufacturing supremo, decided in 1989 to move production of the Sierra to Genk in Belgium, making Dagenham a single-model factory. The decision was widely seen as heralding the complete shut-down of body and assembly operations at the aged factory, built by Henry Ford in the 1920s. But as Hayden later remarked: 'It was the best thing that ever happened to Dagenham.' Concentration on the Fiesta enabled Dagenham at last to come to grips with the inbuilt obstacles to productivity growth presented by its labyrinthine and outmoded layout. Labour relations were also eased by the relative simplicity of one-model manufacture. Dagenham was soon exporting almost half its total production, and in May 1992, Caspers ensured that it would continue to operate at least into the next century when he told union representatives that Dagenham would be the leading plant for the revamped Fiesta, to be launched next year.

Dagenham is not home and dry. But with Valencia likely to build a new mini-car, the British factory is in pole position to win leading plant status for the completely new Fiesta that will emerge around the year 2000. Dagenham's management has set itself exacting productivity targets: by 1997, 'we aim to be the lowest-cost and highest-quality producer of Fiestas and competitive in hours per car with the UK-based Japanese'. Hours taken to build a car are targeted almost to halve from their 1993 level, while volumes climb by more than 45% and the cost per unit is cut by more than 40%. The number of workers in body and assembly will fall, via natural wastage and voluntary redundancy, by just over 1,000 - from about 4,500 last year to just below 3,500 in 1997. The training effort will intensify significantly: each worker will receive 40 hours' training in 1997, up from 17 hours last year.

Jaguar is also in the throes of a radical turnround. After racking up huge losses in each of the four years since Ford bought it for £1.6 billion, it should be operating at a profit by the last quarter of this year - currency movements permitting. Next year, it should make its first full-year profit since Ford acquired it. Under Hayden and his successor Nick Scheele, the company has made spectacular efficiency improvements. At its peak output at the turn of the 1980s, Jaguar employed 10,000 hourly-paid workers making 48,000 cars. This year, its 3,800 hourly-paid workers will produce a total of 36,000 cars - a 50% productivity increase. The transformation is both symbolised and part-effected by Scheele's radical reshaping of Jaguar's final assembly plant at Browns Lane in Coventry. Since 1955, two tortuous production lines had run in cramped proximity down the centre of the factory, so close together that open car doors almost touched and it was impossible for two forklift trucks to pass each other. Not any more. In three hectic weeks last summer, at the modest cost of £8.5 million, Scheele had the lines ripped out and replaced by a single track, a quarter of a mile long, running from one end of the factory to the other. The redesign more than doubled Jaguar's capacity and enabled it to move to lineside delivery.

Ford and Jaguar are still improving, but Vauxhall, General Motors' British car operation, has already achieved a spectacular recovery. At one stage in the mid-1980s, the UK content of Vauxhall cars sank so low that the Government rebuked GM for running such a huge internal trade deficit. Today, the position has been transformed. Vauxhall now has a high balance of payments surplus, and the UK content of both its Cavalier and Astra cars is 60% or more. Its British operations at least match the quality and productivity of its Continental plants, and their costs are much lower than GM's Opel operations in Germany.

Vauxhall's manufacturing revival has been bolstered by the company's success in the UK car market. In the past four years alone, Vauxhall has made total pre-tax profits of £780.5 million, including £185.1 million last year when all its main rivals - Ford, Rover and Peugeot - lost money. Its UK market share has doubled since 1980, from 8.6% to 17.1% - overtaking Rover and challenging Ford, which dropped to 21.5% last year.

Peugeot Talbot, owned by Peugeot Citroen and manufacturing at the old Rootes factory in Ryton, Coventry, has also done well in recent years, remaining profitable - despite the British and mainland European recessions - until 1993. But the slump in car sales has knocked it slightly off course, and plans to expand it into a two-car plant appear to have been indefinitely shelved.

On the surface, the expansion of the Japanese transplants in Britain makes the recent reinforcement of Ford and GM's British operations surprising. Several experts believed the advent of Toyota, Nissan and Honda would trigger application of the Archimedes principle - displacing UK capacity established by existing manufacturers. And while GM has kept its own counsel about the Japanese, the hostility to the transplants evinced by Ford has added to the impression that its ties with the UK might be loosened. Nasser is outspoken about the transplants: 'I don't personally believe Japanese automotive investment in the UK has been a net plus for this country,' he said last year. 'If you look at the transplants versus the fully integrated European manufacturers, there is data to suggest that what we are really doing in the UK is replacing highly integrated production with low local content production. From a national viewpoint, I really question the bottom-line effectiveness of these investments for the UK.' But Rhys believes the reverse is true: 'Had it not been for the Japanese coming here to show that we can make cars very efficiently in the UK, it is possible that Ford and GM would have closed at least one of their assembly factories in Britain,' he says. 'Talking to them now, it's obvious that they suddenly started asking themselves what was the point of moving to Germany when best practice was here and they could learn from it.' Ford might dispute the argument that it has gained from the Japanese arrival, but the benefit to another group of companies is incontestable. Component makers in Britain, previously left to contemplate the depressing prospect of steadily declining domestic demand, now have an opportunity for growth which would have been inconceivable a decade ago. Thanks to the combination of British government insistence that all transplants reach 80% local content within a limited period of start-up production, and Japanese sensitivity to European politics, Britain has avoided the experience of the US, where a tidal wave of Japanese component suppliers followed the transplants set up by Honda, Toyota, Nissan, Mazda, and swamped American component makers.

Two-thirds of Nissan's 198 suppliers are in Britain, and about half of Honda's and Toyota's. The Japanese have given an ailing, sub-standard industry a colossal shot in the arm. Those companies which have met the exacting standards demanded by the Japanese are now in demand from manufacturers throughout Europe, notably from Germany. As a result, the UK component industry has received a thorough education in manufacturing techniques that are leading the global motor industry. Kanban - just-in-time delivery - and kaizen - continuous improvement - are now articles of faith for the British suppliers to the transplants. So are a host of other, previously alien practices, ranging from suggestion schemes to boost employee involvement to close and long-term collaboration with the car assemblers which were traditionally treated as adversaries in trials of strength over price rises.

Now the whole economics of doing business has been overturned: essentially, there are no price rises. Quite the reverse: the Japanese expect prices to fall over the lifetime of a supply contract on the common-sense assumption that the more practice a supplier has in making a product, the cheaper it can produce it. The system imposes enormous discipline and a huge incentive to increase efficiency. For the British companies which master the technique, the world - or at least Europe - is their oyster.

But it's a situation which won't last forever. Seven years ago, 40 of the top 60 component suppliers in Britain were British-owned. By 1991, the ratio was reversed: only 20 British firms, the rest all foreign-owned. The change has come in two ways: direct foreign investment in greenfield factories, such as that by Germany's Robert Bosch in an alternator plant in South Wales, and foreign takeovers of UK businesses - such as Nippondenso of Japan's purchase of IMI's radiator operation, Magneti Marelli's takeover of the Lucas lighting, starters and alternators operations in Birmingham, and the purchase by Germany's Thyssen of the former Birmid Qualcast foundry business.

The trend will continue because, says Rhys, globalisation of component supply is in its infancy. In Europe, excluding Sweden and the Benelux countries, which have virtually no domestic component industry, Rhys estimates that only about 11% of a car's components by value - themselves roughly 55% of the value of a car - are sourced outside the country where that car is made. Rhys says that UK firms must make the most of their head start: 'The components sector myth is ahead of reality. It is by no means certain that we are going to keep the size of components industry we have today. We have been given a chance by the Japanese, but it is a once-and - for-all opportunity.' Colin Hope, chairman and chief executive of T and N, agrees: 'The key issue is the efficiency of the UK component manufacturers,' he says. 'Having got on to one rung of the ladder, the question is can we stay there and keep moving up. I am bullish about the prospects for those companies that are doing things properly. I think we are, and in some areas we are now beating the Japanese. But even T and N isn't perfect; there are plenty of cases where our management still has a lot to learn and a lot to do. We have to maintain a relentless pressure on our people down the line to keep on thinking ahead and improving efficiency.' T and N is a notable case of a British company which has gained international market share over the past decade. By a combination of greater UK efficiency and strategic takeovers in Britain, the US and Germany, the company has emerged at the forefront of its product areas. 'Ten years ago, there were at least six leading manufacturers of bearings in Europe and America,' Hope says. 'Today there are two: ourselves and Federal Mogul of the US. And there is still a lot of change to come in other sectors.' Two key factors, Hope says, will determine whether British companies are victors or victims in the impending shake-out: 'There is management and there is investment, and the two are intertwined. There are still too few companies that are constantly and consistently investing in updating factories or updating products. T and N has been motivated to invest and grow, but you can see how easy it would be for a typical UK board of directors to say, "why not take the low-risk road and consolidate?" But in a changing world, mere consolidation is fatal.' Even GKN, which dominates the world market for driveline products - constant velocity joints used in front-and four-wheel-drive vehicles to transmit power smoothly from steering system to wheels - sailed close to the wind. In the 1980s, its technology centre near Wolverhampton embarked on a diversification push. The strategy was done for the best of reasons: to find other products to complement the phenomenally successful driveline range. But the effect was almost disastrous: GKN allowed investment in updating its core product to slacken. The error almost let in NTN, GKN's former licensee which had great expectations of dislodging the UK company from its world-leading position. The crunch came in the battle to supply Ford's Mondeo, a trail-blazing model that is the first world car produced by any western manufacturer. Although GKN supplied Ford on two continents, NTN almost won the contest. But just in time, GKN pulled itself together. It abandoned its technology diversification effort, and focused all its resources on the driveline components. Ford was convinced, and GKN had assured itself of its place on the car that is the prototype for Ford's globalisation programme.

But GKN - and other UK component manufacturers such as TI with its Bundy tubes business, T and N in pistons, bearings and friction materials, Lucas with diesel fuel injection systems, BTR in seals and Pilkington in glass - are exceptional in today's UK motor industry. All of them own the intellectual property that distinguishes their product. The same cannot be said for Britain's carmakers. The UK has become a transplant automotive economy, and transplant economies are technologically subservient. Kumar Bhattacharyya, professor of manufacturing systems at Warwick University, says: 'In a global economy, if any part of that economy fails, it has an effect on the transplant. Whereas if you own the technology, you are in control of your own destiny.' Apart from Rolls-Royce Motors, which will make about 1,400 Rolls-Royce and Bentley cars this year, no carmaker of any size is still British. Rolls itself was almost bought by BMW two years ago, and is looking for a foreign partner. Britain may soon have virtually no intellectual property in automotive technology except for its renowned expertise in design consultancy and in the rarefied field of Formula One racing.

Both Rover and Ford have R and D facilities here. But both are more likely to dwindle than to expand. Rover, of course, has no basic engineering technology of any relevance save for suspension knowhow and its K-series engine. The K-series is unlikely to be succeeded by anything other than a BMW engine range. Rover will probably retain its styling department and will have an input into the new Mini when that eventually arrives. But few of those close to the company doubt that most of the engineering for all future Rover models and components will be done by BMW.

The same drift to Germany is likely in Ford. Under its globalisation plan, Europe will be the vehicle programme centre for small and medium-sized cars and the R and D will be 'co-located' at Dunton in Essex and Merkenich near Cologne. But this is a compromise that appears unlikely to persist. Nasser said in April, after the globalisation plan was revealed, that Ford was sticking to the co-location scheme 'because we believe we can make further efficiencies. If we can't get the sites together to world-class competitive levels, we will have to circle back on co-location.' Few experts doubt that, if it has to choose, Ford will opt for Merkenich as its European R and D centre.

At the end of the day, Britain's best hope of retaining a substantial R and D organisation probably lies at Jaguar's Whitley engineering centre near Coventry. Although large, rear-wheel-drive car engineering will be concentrated in Detroit under the Ford globalisation, Whitley could emerge to play a big role in designing future up-market cars for Ford in Europe. If Ford uses its planned small Jaguar to replace the Granada/Scorpio range, and if that Jaguar is built in the UK, then Whitley could come into its own.

But that - apart from Nissan's small development centre at Cranfield Institute of Technology - is that. The Japanese do almost all their research, development and engineering at home in Japan. GM Europe's engineering effort is focused on Russelsheim in Germany. Peugeot does it in France.

Does this matter? Not in the sense that it imperils thousands of jobs. Or that it will cause a vast net profit outflow. Ford and GM have been remitting dividends to America for decades in the good years, and they have still been making big investments in Britain. Yet the loss of indigenous R and D capability must erode the fabric of Britain's industrial base. R and D is where the greatest value is added, where the intellectual property resides, where the mainspring of growth is to be found. T and N's Hope says: 'Lack of car design and engineering does not constitute a crisis, but it would have been preferable to retain it. The worry is that without it, you slowly drain the intellect of the country.' Without a strong R and D base, the roots of Britain's car manufacturing revival will be shallow. 'The recovery has created employment, stabilised the industry base, helped the supply sector and taught us important lessons about production techniques,' says Bhattacharyya. 'But has it helped to make industry robust, as the German, the Japanese or the American car industry is robust? No.' Beggars cannot be choosers. Britain's motor industry was reduced to near-penury by more than 30 post-war years of complacent management, destructive trade unions, and ignorant governments. British Leyland's technical bankruptcy was a potent symbol, as well as the biggest practical expression of that decline. Thanks to the Thatcher governments, with their labour relations reforms and promotion of investment by the Japanese carmakers, Britain took the only route it could. It recreated an industry. The industry's form was not ideal, but in the appalling circumstances, it was by far the best that could be done.

As a newly appointed director of Dunlop - whose downfall and subsequent takeover made it the component industry's equivalent of BL - Hope experienced the death throes of the British car industry in the early 1980s. 'Unquestionably, it would be preferable to have a UK-owned worldwide car manufacturer,' he says. 'But that battle was lost years and years ago. The idea of hanging on to that idea now is absolutely ludcrous. We must make the most of what we have - and there is plenty here to make the most of.' Andrew Lorenz is deputy Business editor of the Sunday Times.

Showpiece of the industry: Nissan's Sunderland plant.

'What we want,' said the North-East union leader in late 1981, 'is our own car industry. The West Midlands has had it all to itself long enough.' He got his wish. This year, 4,250 workers in Nissan's Sunderland factory will turn out between 200,000 and 240,000 Primera and Micra cars, and 24 of the plant's 198 suppliers are from the North East.

That Nissan came to Britain at all was essentially due to two people: Takashi Ishihara, the Nissan president, who saw the plant as being vital to the company's ambitions of expanding in Europe; and Margaret (now Lady) Thatcher. She recognised that Britain needed Nissan to help revive car making in the UK and to improve the quality and efficiency of the indigenous component industry. She spearheaded a British government effort which has few if any precedents in UK industrial history. But even then, Ishihara's determination to proceed with the project was bitterly opposed by Ichiro Shioji, the Nissan union leader. And for a long time, Shioji was tacitly supported by Katsuji Kawamata, Nissan's chairman and Ishihara's boss.

Eventually Kawamata shifted his ground and a compromise was found to enable the plant to proceed. Instead of a full-scale manufacturing plant to produce 200,000 cars a year, Nissan would initially operate only an assembly unit making 24,000 cars a year. The decision was announced in January 1984, and Nissan chose the Sunderland site. The price for Britain was high: Nissan received a total £125 million from the Government.

Both the UK investment and Nissan's confidence have been amply repaid. Investment in Nissan Motor Manufacturing (UK) now totals £900 million. Last year, Nissan exported more than 182,000 cars earning a trade surplus of more than £500 million.

It has not all been plain sailing though. Like the rest of the car industry, Nissan was concerned by Norman Lamont's 1991 Budget,which piled taxes on the motor industry just as UK car sales were slumping.Representations made to the Government by Japanese manufacturers meant most of the measures were reversed the following year.

Nissan has announced small profits at Sunderland in each of the last three years, but the European recession has delayed the day when it will start making a significant return on investment. Output this year will be around 25% below the installed capacity of 310,000. Executive director John Cushnaghan who, with Nissan UK's MD Ian Gibson, was one of the first UK appointments to the plant says: 'We have now peaked in the growth phase which has continued since 1984. Now we have launched a post-growth initiative.' This three-year programme, called NX96, is designed to raise productivity in every area of the Sunderland plant to the levels of the best Nissan factory in Japan. Since, according to Garel Rhys of Cardiff BusinessSchool, it takes about 16 hours per man to build a car at Sunderland, by the time the programme is completed, in 1996, Nissan should be on course to producing 400,000 cars a year before the end of the century.

UK car production in 1993.

Rover 356,280

Ford 271,793

Nissan 246,281

Vauxhall 232,569

Peugeot Talbot 72,902

Land Rover 50,524

IBC (General Motors) 41,327

Toyota 37,314

Honda 32,139

Jaguar Daimler 29,567

Carbodies 1,530

Rolls Royce 1,263

TVR 827

Metrocab 347

Lotus 320

Aston Martin 97

Others 444

Total 1,375,524

1993 car production in EU countries.

Belgium 100,698

France 2,836,280

Germany 3,753,341

Italy 1,117,029

Netherlands 80,246

Spain 1,505,949

UK 1,375,524

Source of UK new car registrations

UK 792,921

Other EU 760,400

EFTA 21,761

Other West European 118

E. Europe 25,148

Japan 143,948

Other countries 34,130

Total 1,778,426

Employment in UK motor industry '93.

Motor vehicle and

component manufacture 270,000

Other supplies 61,000

Retail distribution

+ motor vehicle hire 332,000

Repair of motor vehicles 183,000

Total 846,000.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today