A central feature of the Euro debate has been the procession of industrialists warning of dire consequences unless the UK joins Euroland without further delay. According to the pro-euro lobby, we will lose out on inwards investment, and therefore lose jobs and income.

One of the leading "players" in projecting this Armageddon scenario has been the Nissan Motor Company (UK), which produces cars from its plant in Sunderland – a plant claimed to be the most efficient in Europe. At risk, according to Nissan, is a £150 million investment programme for the new generation "Micra" mini car, the current model of which is produced at the Sunderland plant. The expectations have been that Sunderland would get the work producing the new model but Nissan is now threatening to transfer the work to Spain or France.

However, like so many aspects of the Euro debate, this threatened withdrawal of investment by Nissan from its Sunderland plant is not all it seems. Far from being a gilt-edged company leading the way in supporting the British economy, Nissan has its own agenda.

For a start, it is important to appreciate that Nissan is a loss-making company. So great are is losses that, by 1999, it had accumulated debt of 1.4 trillion Yen (176 Yen = £1). Such a l^evel of debt is so vast that, had Nissan not been a traditional Japanese company – with strong links to the banking sector – it would have been bankrupt.

Clearly, however, even the giant Nissan could not sustain this level of debt, and it has been forced to take emergency measures to restore profitability. As part of its overall strategy, in March 1999, it sold a 37 percent stake to the French motor group Renault for $5.5 billion. With a combined output of 4.8 million vehicles a year, this made Renault the largest automobile manufacturer in the world and owner of the Nissan brand in Europe.

As part of the package, Carlo Ghosn, then executive vice-president of Renault moved over to become chief operating officer at Nissan. He immediately became known as "Le cost-cutter", setting out on a programme of returning Nissan to profit by 2001 and its overall debt to less than 700 billion Yen. By October, he had announced that five Japanese plants were to close, shedding 21,000 staff. The company then announced a plan to cut the worldwide workforce by 14 percent by April 2002, amounting to 127,000 job losses.

Against this background, it is evident that the company is in serious trouble, and is looking to cut back its costs and rationalise its production. However, as important, it must be appreciated that, in the UK, the voice of Nissan is not actually the voice of Japanese company famed for its inwards investment. It is now the voice of a French company – Renault.

What also must be appreciated is that Renault itself has its own problems. Traditionally reliant on its own domestic market, it had seen its sales heavily eroded by foreign (mainly German) imports. They have risen from 22 percent in 1978 to 40-45 percent in 1998.

Yet another important fact is that Renault is still largely state owned. Although it was partially privatised in 1998, the 46 percent of the company sold went to Swiss banks, Matra and the Elf petroleum company – with three percent owned by its staff. That not only leaves 44 percent in French government hands, but many of its major shareholders, Elf and Matra, are also partly state owned.

Given the close relationhip between French industry and its government, it is fair to say that, when the company makes a strategic announcement, the government has at least agreed the text, if not actually inspired it. Therefore, with Renault having the controlling interest in Nissan (UK), the French government cannot be very far behind what Nissan says.

Putting all this together, it is now important to put the Nissan issue in its broader context. Here, it well known that the European car industry is 40 percent overcapacity. Furthermore, the profitability of the smaller models – like the "Micra" – is under considerable pressure.

Thus, before even it acquired Nissan, Renault, had needed to cut back some of its plants as it was only operating, worldwide, to 45 percent capacity. One closure came in March 1997, when chairman Louis Schweitzer – conscious of the high unemployment in his own country (currently at 10.5 percent) - let the axe fall on the Vilvoorde plant outside Brussels in Belgium. Some 3,000 staff, making the Clio and the Megane, were made redundant.

Commentators at the time – when the company was expected to declare a £500 million loss for 1996 – accused Louis Schgweitzer, Renault's chairman of sacrificing foreign jobs to save those of French workers. His action "called into question the French government's belief that EU altruism means more jobs for all". Both of France's left-leaning daily newspapers, Le Monde and Liberation, condemned the government for mouthing platitudes about the need to create a "social" Europe.

What must have surprised both Renault and the French government was the public anger in Belgium. Some 4000 demonstrators took to the streets in Brussels and car unions in Belgium, France and Spain called a one-day strike. In the wake of the Vilvoorde closure, trade unions also claimed that Renault was also planning to shed 2,764 jobs in France. Clearly, plant closures were a highly sensitive issue with major political implications.

And it is from there that Nissan's Sunderland site began to feature in the "debate". Up until then, it had been feted as the most efficient in Europe. Its future was considered secure. However, in April 2000, John Cushnaghan, managing director of Nissan Motor Manufacturing (UK) announced – out of the blue - that he was undertaking a major cost-cutting exercise. The high value of the pound was imposing an "unsupportable burden", he claimed. All of a sudden, sunderland was "at risk".

By May, the company was claiming it needed to cut costs by 30 percent to compensate for the losses it had incurred through the strength of Sterling. It added that there was a possibility that the next generation of the Micra would be built in French and Spanish Factories of its partner Renault, transferring a planned £150 million investment. A Nissan spokesman said: "The decision to build the Micra has not yet been made, and there is a risk Sunderland will not win the contract. Now we have an alliance with Renault, there are more options open to us what cars we build where".

In June, managing director John Cushnaghan was addressing an UK Parliamentary Select Committee claiming that 12,000 jobs were at risk owing to "exchange rate uncertainty". The exchange rate would be one of the issues considered by the Nissan Board when deciding where to build the new Micra. By July, Tony Blair was offering to hold talks with Carlos Ghosn. But industry analysts cited by The Daily Telegraph argued that Nissan was seeking to use Sterling's independence from the Euro as an excuse for a rationalisation already planned.

And there is the nub of the issue. The "industry analysts" have it right. The threatened decision to relocate the Micra plant from Sunderland is undoubtedly motivated by the need for Nissan to rationalise its production. It would make considerable sense to relocate Micra production to existing Renault plants in France and Spain, especially if there were cutbacks planned for those units.

However, given the political sensitivities of plant closures, any such decision would be highly unpopular in the UK, and especially Sunderland. And if the "Micra" investment went to Spain or France, it would reflect very badly on Renault and the French government. The Eurosceptics would have a field day. The hostile reaction to BMW when it abandoned the Rover Group would be only a foretaste of the outrage.

Thus, the "Euro" presents the perfect alibi. It gives Renault the perfect opportunity to divert attention from a decision it wanted to make anyway. And, by shifting the focus onto the Euro, the British government is put in the frame, furthering the pressure on Britain to enter Euroland. As a strategy, it is clever and devious. But the real agenda should be transparent to anyone who understands what is really going on.

ends

Richard North
5 July 2000   

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