Theresa May, Nissan and industrial non-strategy: A historical perspective

This isn't the first time our prime minister has had to get down and dirty with the Yokohama car maker.

by Jack Torrance
Last Updated: 31 Oct 2016

Few people know exactly what was said the in the meeting between Theresa May and Carlos Ghosn, Nissan’s enigmatic boss, at Downing Street earlier this month. But it seems likely that the prime minister had to offer more than the warm words and vague promises the government has talked of in the days since. It will have demanded something cast iron before deciding to step up production at its factory in the north-east of England (It’s worth remembering than Ghosn also runs Renault, and consequently has plenty of experience of squeezing governments for support).

Yesterday the business secretary Greg Clark gave the most revealing glimpse of what was said so far. ‘Our objective would be to ensure we have continued access to the markets in Europe and vice versa without tariffs and bureaucratic impediments, and that is how we will approach those negotiations,’ he said on the BBC’s Andrew Marr Show. But some assume Nissan was offered promises of compensation if tariff-free access isn’t achieved.

If that’s the case then the government is playing a dangerous game. Helping out the car industry is politically easy – it evokes warm feelings of nostalgia for the time Britain ‘used to make things’. And this case is especially emotive given Nissan’s presence in the economically deprived Sunderland, where other skilled employment prospects are few and far between. But cutting backroom deals for companies that come calling looks less like an industrial strategy than an ‘industrial make-it-up-as-you-go-along.’

Read more: Manufacturing - heart of the economy or just a sacred cow?

Others will come calling soon enough – lobbyists from the City to the National Farmers Union via the FTSE 100 and the nation’s universities are gearing up to demand their own slices of compensation post-Brexit. That mythical £350m per week isn’t going to stretch very far when the government starts ‘picking winners’. And doing so will be a political quandary.

As NIESR fellow Jonathan Portes pointed out last week, ‘Nissan employs 7,000 people in the UK and is a major exporter. On the other hand, so is Citibank, which employs 9,000; and financial service exports are at least as much under threat as cars, if not more so.’ But the public would be understandably incensed if the government were seen giving hand-outs to the ‘bloody bankers.’

Of course this isn’t the first time such wrangling has gone on. More than 30 years ago when Nissan first decided to begin manufacturing in the UK it had to reach an agreement with the then-PM, Maggie Thatcher. Here’s MT contributing editor John McLaren’s first-hand account of what it takes to ink such a deal:

Theresa May’s deal with Nissan – shrouded in mystery as it is - isn’t the first time the carmaker and the government struggled to reach an entente over its plans for Sunderland. In the early 1980s, when the plan to manufacture cars in the north-east was first hatched, a stand-off developed. Mrs Thatcher was adamant that she wanted Nissan to build 200,000 vehicles a year from the outset, with half earmarked for export to continental Europe, whereas the cautious Nissan wished to begin with 100,000, supplying only the domestic UK market.

At the time I was running the Barings’ office in Tokyo, but I was doing this on sabbatical from the diplomatic service, and, courtesy of the FCO, was fluent in the lingo. One day in late 1983 I got a call from Toshiaki Ogasawara, CEO of a car components maker, who told me that he had just finished a round of golf with Takashi Ishihara, President of Nissan, who had confided in him about this stand-off and had asked the internationally experienced Ogasawara for advice on handling inscrutable foreigners. Aware of my government background, Mr Ogasawara suggested introducing him to me.

A dinner date was duly set for a week or so hence, and I desperately needed to use the time to unearth a simple truth: if Nissan were willing only to offer the lower initial production number on a take it or leave it basis, which would the government choose? However, this truth proved elusive. My first step was to trot round to the embassy. They quickly admitted that they had been unable to add much value to the dialogue since their only contacts with Nissan were at a fairly junior level, and anyway, since London was playing its cards very close to the chest, the diplomats had no idea what the UK’s real negotiating strategy was. They recognised that my dinner might offer a chance to get some sort of message across, but could only suggest that we take it up direct with the DTI.

So a couple of days later John Dare, my boss in London, met the relevant Deputy Secretary. All he got out of him was that the government really, really wanted the number to be 200,000, but as to the vital take or leave question, he had no answer: they had just been hoping that Nissan would somehow prove accommodating. He agreed to consult his Secretary of State urgently. We waited with bated breath as we burned through another day, but the outcome was the same old story.

It was now crystal clear that only one person could provide a definitive answer - the resident of Number Ten, and with my dinner less than 24 hours away, I was almost out of time. By early evening the next day, I had given up hope. A car had already arrived to take me to the restaurant, where I would miserably fail to live up to Mr Ogasawara’s billing as someone who might be able to help. Then the phone rang. It was a jubilant John Dare, relaying a call from the DTI. They had managed to get a meeting with Mrs T. She was of course still hoping for the more ambitious number, but if it truly was take it or leave it time, she would bite their arm off.

The three of us had a magnificent kaiseki banquet in an exquisite private room. For the first couple of hours we made small talk, before tiptoeing onto the key ground. Mr Ishihara made it clear that Nissan had zero intention of producing 200,000 units from the outset. I responded that, if the push came to shove, I was confident that the UK government would rather have a small factory than no factory at all. Ishihara didn’t quiz me on the reasons for my confidence and I didn’t volunteer any; he was no fool and would have assumed that I had done my homework. A few months later Nissan and the government signed an agreement to start production modestly, but of course with the hope that over time it would grow (which it has, big time.)

After playing our brief walk-on parts, John Dare and I left the stage, but some years later something unexpected happened. Having long left Barings, I was back in the UK and enjoying my pride and joy - a rare and very high-powered Nissan Skyline GTR. The enjoyment came to an abrupt halt when the engine blew up. With the car long out of warranty, I was quoted £35K for a new one, which would have to be ordered specially from Japan. Days later the astonished Nissan dealer rang to say that a new engine was being air-freighted with the instruction that it should be fitted entirely free of charge, and also that he had been asked to pass on a message: our compliments to Mr McLaren and thank you.


Find this article useful?

Get more great articles like this in your inbox every lunchtime