Japanese Auto Investment into the United Kingdom

1,056 views

Published on

Reflections on Japanese automotive investment into the UK since 1990. Stresses the importance of the Nissan investment.

Published in: Sports, Automotive
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,056
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Japanese Auto Investment into the United Kingdom

  1. 1. Recent History of Japanese Autos in the UK Too Good to be True? Louis Turner Chief Executive Asia-Pacific Technology Network 24 Feb 2009
  2. 2. Intro • This is work in Progress – Not bothering with statistics at this stage • Basic thesis – Impact of Japanese Auto companies on British economic performance goes way beyond the bare investment figures – British wooing of these companies is a major success story for British policy-makers • But how secure are these investments? – Japanese consumer electronic companies divested very fast – Could the same thing happen with autos?
  3. 3. Basic Background • British auto production peaked in 1972 at around 1.8 million p.a. • By the late 1980s, that had halved • Back up to 1.45 million cars and 203,000 commercial vehicles (2008) – 4th in Europe: 12th in World – Highly cosmopolitan • Japanese companies produce roughly 50% – From nothing in 1986 – Nissan/Sunderland now the largest auto plant in UK • (Shouldn’t just think Auto assembly: also: – Components, Design .... And the likes of Komatsu)
  4. 4. The Situation in 1990 • UK first main beneficiary of Japan’s auto investment – Nissan had plant from 1986 • (plus earlier one in Spain) – Honda had alliance with Rover • Going back to (1979) • Honda planned to open Swindon plant in 1992 – Toyota was planning to open its first European plant in the UK in 1992 • (but had put its European HQ in Brussels – 1990)
  5. 5. Story of Steady Deepening • All three companies have continued to expand – Mostly on initial sites – Plus Toyota’s engine plant on Deeside • Steady stream of Japanese component suppliers have come in as well – Some divestments – Sumitomo Wire (2000) – now sourcing from Africa (?) • By around 2004, they all got into profitability (?)
  6. 6. The Issues in the early 1990s • Britain’s “transplant” diplomacy with protectionist Europe – (consistency of British diplomacy) • (more interesting) the spread of Japanese standards within British industry – Nissan’s Cogent project – SMMT Industry Forum (1996+) – National Supply Chain Programme (DTI) 2002+
  7. 7. Honda-Rover affair • Honda – Rover – 1979 – broad alliance with (then) British Leyland – 1983 – Joint Development Project • Honda Legend/Rover 800 series – Honda picks up 20% equity stake in Rover – 1992 - Honda of the U.K. Mfg. Ltd. (HUM) • Swindon Factory • Rover has 20% stake – 1994 – British Aerospace sells its 80% of Rover to BMW • Rover offered both BMW and Honda scale opportunities – Honda wasn’t willing to take majority control • And under-valued Rover – BMW willing to take Bae’s full 80% • And valued Rover more highly • Bae clearly lost patience ...... And went for the cash
  8. 8. Honda/Rover (ii) • Honda’s position? – Anger – But did not respond fast enough when BAe made it clear Rover was in play • Perhaps financial constraints (Honda sales were dropping at this point) • Perhaps unwilling to take a complex decision at the necessary “Anglo- American” speed • Turned down BMW’s offer of a continued relationship • Took full control of Swindon plant • Ultimately, did this matter? (BMW failed with Rover, but revitalised Cowley and the Mini) – Could Honda have genuinely turned Rover around? – How much of a management drain would there have been on Honda?
  9. 9. Euro/Sterling issue • Was this a serious issue which has now generally subsided? – Having speeded diversification of component supply to elsewhere in Europe? • 1997 Toyota President warning re new investment • 2000 – Ghosn-Blair re need for stability – Toyota asking suppliers to quote in Euros – Major cost-cutting drives in Nissan (30% required), Honda etc • Honda particularly vocal – But, by 2004, Swindon plant most profitable in the UK – However in 2007 Honda President says no new investment in the UK as long as UK outside the Eurozone • Interested in hearing views on this
  10. 10. NSG - Pilkington • Technically a case of Inward Investment • NSG went from minority stake to full control over 2000- 2006 – (took time to get consensus within NSG) – NSG was being pressured to go global in support of the Japanese OEMs • Has many characteristics of a reverse takeover – By 2008, Stuart Chambers was Chairman and Chief Executive – 5/12 directors non-Japanese (including Finance Director) • Currently having to take some tough (and relatively controversial) decision • The Pilkington management brings a genuinely global perspective to the party
  11. 11. Toyota in Europe (2005) • eight manufacturing plants in six countries – U.K., France, Poland, Turkey, Portugal and the Czech Republic – With St Petersburg Plant to come • European design centre (France) • A dedicated R&D facility
  12. 12. UK-Wider Europe (East Europe) This study is purely on investment into the UK • – But the competition from other parts of Europe has to be one part of the story Competition with “Old” Europe? • – Siting of European HQs etc – Toyota and France the Valenciennes plant (State-of-art small car facility) • European Design Development Centre • – Nissan The Renault factor • Sunderland bids against Renault plants • Competition with “New” Europe? • – Serious Japanese-led auto complexes in Czech Republic and (emerging) round St Petersburg – Currently, not picking up anything like the Consumer Electronics migration East (wearing my optimist’s hat) possibility that Japanese auto industry will see UK as • chosen European complex for up-market, complex auto developments
  13. 13. Contribution to High Value-Added Model? Recent Tory spokesman’s claim that the Automotive balance of payments has • seriously deteriorated (since when?) Will have to address these issues • Starting Point: the Rover/Ford/Vauxhall complex would have deteriorated • whatever the Japanese investment decisions – The classic British components suppliers (Lucas et al) would mostly have gone bust anyway – (Hats off to GKN for surviving) But what has happened to the supply-chain arrangements of the Japanese Big • Three? – Clearly some shift in sourcing to the rest of Europe – But Japanese component suppliers still investing (?) Development/design contributions • – Nissan Technical Centre Europe (was leading on the Almera by 2000) – Nissan Design Europe (2003) Have fed into Motor Racing • – Formula 1 (Honda) – Subaru
  14. 14. The Current Crisis? • We’re seeing – Some sackings (Nissan) – Temporary factory closure (Honda) • Currently seems that the pain is being shared globally – Japan doing worse than many?
  15. 15. How secure? • Got long personal email from senior exec back in Tokyo – UK has good merits. Stable economy, politics, stable taxes (vs even California situation!), friendly people, English language, Euro-zone and export even beyond, etc is all running in your favour. Current exchange rate too, but that could change? – But stressed that Japanese decision-making can be swayed by perceptions of individual executives • British operations are getting serious mandates from Japan (this is work in progress) – (Export mandates?) – Honda/Swindon is the “mother” plant for Turkish expansion – Toyota’s E-GPC (European – Global Production Training Centre) • Production and Maintenance skills to European operations – Nissan is only non-Japanese centre for developing and overseeing [production/quality standards] in large parts of Nissan’s global networks
  16. 16. Conclusions • My gut feel is that the UK should be able to hold on to a significant Japanese automotive cluster – But that it will evolve – Additional manufacturing investments will increasingly go to East Europe • The interesting questions will turn around the UK’s ability to capitalise on next-generation skills – Design – Congestion/Environmental Management • (London as a test for Electric Vehicles?)

×