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Recent History of Japanese Autos in
              the UK
      Too Good to be True?
                 Louis Turner
        ...
Intro
• This is work in Progress
   – Not bothering with statistics at this stage
• Basic thesis
   – Impact of Japanese A...
Basic Background
• British auto production peaked in 1972 at around 1.8
  million p.a.
• By the late 1980s, that had halve...
The Situation in 1990
• UK first main beneficiary of Japan’s auto
  investment
  – Nissan had plant from 1986
     • (plus...
Story of Steady Deepening
• All three companies have continued to expand
   – Mostly on initial sites
   – Plus Toyota’s e...
The Issues in the early 1990s
• Britain’s “transplant” diplomacy with
  protectionist Europe
  – (consistency of British d...
Honda-Rover affair
• Honda – Rover
    – 1979 – broad alliance with (then) British Leyland
    – 1983 – Joint Development ...
Honda/Rover (ii)
• Honda’s position?
    – Anger
    – But did not respond fast enough when BAe made it clear Rover was in...
Euro/Sterling issue
• Was this a serious issue which has now generally subsided?
   – Having speeded diversification of co...
NSG - Pilkington
• Technically a case of Inward Investment
• NSG went from minority stake to full control over 2000-
  200...
Toyota in Europe (2005)
• eight manufacturing plants in six countries
  – U.K., France, Poland, Turkey, Portugal and the
 ...
UK-Wider Europe (East Europe)
    This study is purely on investment into the UK
•
     – But the competition from other p...
Contribution to High Value-Added
                  Model?
    Recent Tory spokesman’s claim that the Automotive balance of...
The Current Crisis?
• We’re seeing
  – Some sackings (Nissan)
  – Temporary factory closure (Honda)
• Currently seems that...
How secure?
• Got long personal email from senior exec back in Tokyo
    – UK has good merits. Stable economy, politics, s...
Conclusions
• My gut feel is that the UK should be able to hold
  on to a significant Japanese automotive cluster
   – But...
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Japanese Auto Investment into the United Kingdom

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

Published in: Sports, Automotive
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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?)

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