- Japanese automakers like Nissan, Honda, and Toyota have significantly contributed to the UK auto industry since first establishing plants in the 1980s, now producing around 50% of UK vehicles.
- Their investments have gone beyond just assembly to include components, design, and other activities and have helped revive the UK industry after its decline.
- However, the long-term security of these investments is uncertain as exchange rates, policies, and individual executive perceptions could influence future decisions about new investments. The UK aims to capitalize on next-generation skills in design and environmental areas.
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Japanese Auto Investment into the United Kingdom
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. Intro
⢠This is work in Progress
â Not bothering with statistics at this stage
⢠Basic thesis
â Impact of Japanese Auto companies on British economic
performance goes way beyond the bare investment figures
â British wooing of these companies is a major success story
for British policy-makers
⢠But how secure are these investments?
â Japanese consumer electronic companies divested very
fast
â Could the same thing happen with autos?
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)
â 4th in Europe: 12th in World
â Highly cosmopolitan
⢠Japanese companies produce roughly 50%
â From nothing in 1986
â Nissan/Sunderland now the largest auto plant in UK
⢠(Shouldnât just think Auto assembly: also:
â Components, Design .... And the likes of Komatsu)
4. The Situation in 1990
⢠UK first main beneficiary of Japanâs auto
investment
â Nissan had plant from 1986
⢠(plus earlier one in Spain)
â Honda had alliance with Rover
⢠Going back to (1979)
⢠Honda planned to open Swindon plant in 1992
â Toyota was planning to open its first European
plant in the UK in 1992
⢠(but had put its European HQ in Brussels â 1990)
5. Story of Steady Deepening
⢠All three companies have continued to expand
â Mostly on initial sites
â Plus Toyotaâs engine plant on Deeside
⢠Steady stream of Japanese component suppliers
have come in as well
â Some divestments
â Sumitomo Wire (2000) â now sourcing from Africa (?)
⢠By around 2004, they all got into profitability (?)
6. The Issues in the early 1990s
⢠Britainâs âtransplantâ diplomacy with
protectionist Europe
â (consistency of British diplomacy)
⢠(more interesting) the spread of Japanese
standards within British industry
â Nissanâs Cogent project
â SMMT Industry Forum (1996+)
â National Supply Chain Programme (DTI) 2002+
7. Honda-Rover affair
⢠Honda â Rover
â 1979 â broad alliance with (then) British Leyland
â 1983 â Joint Development Project
⢠Honda Legend/Rover 800 series
â Honda picks up 20% equity stake in Rover
â 1992 - Honda of the U.K. Mfg. Ltd. (HUM)
⢠Swindon Factory
⢠Rover has 20% stake
â 1994 â British Aerospace sells its 80% of Rover to BMW
⢠Rover offered both BMW and Honda scale opportunities
â Honda wasnât willing to take majority control
⢠And under-valued Rover
â BMW willing to take Baeâs full 80%
⢠And valued Rover more highly
⢠Bae clearly lost patience ...... And went for the cash
8. Honda/Rover (ii)
⢠Hondaâs position?
â Anger
â 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 âAnglo-
Americanâ speed
⢠Turned down BMWâs 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)
â Could Honda have genuinely turned Rover around?
â How much of a management drain would there have been on Honda?
9. Euro/Sterling issue
⢠Was this a serious issue which has now generally subsided?
â Having speeded diversification of component supply to
elsewhere in Europe?
⢠1997 Toyota President warning re new investment
⢠2000
â Ghosn-Blair re need for stability
â Toyota asking suppliers to quote in Euros
â Major cost-cutting drives in Nissan (30% required), Honda etc
⢠Honda particularly vocal
â But, by 2004, Swindon plant most profitable in the UK
â 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. NSG - Pilkington
⢠Technically a case of Inward Investment
⢠NSG went from minority stake to full control over 2000-
2006
â (took time to get consensus within NSG)
â NSG was being pressured to go global in support of the
Japanese OEMs
⢠Has many characteristics of a reverse takeover
â By 2008, Stuart Chambers was Chairman and Chief Executive
â 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. Toyota in Europe (2005)
⢠eight manufacturing plants in six countries
â U.K., France, Poland, Turkey, Portugal and the
Czech Republic
â With St Petersburg Plant to come
⢠European design centre (France)
⢠A dedicated R&D facility
12. UK-Wider Europe (East Europe)
This study is purely on investment into the UK
â˘
â But the competition from other parts of Europe has to be one part of the story
Competition with âOldâ Europe?
â˘
â Siting of European HQs etc
â Toyota and France
the Valenciennes plant (State-of-art small car facility)
â˘
European Design Development Centre
â˘
â Nissan
The Renault factor
â˘
Sunderland bids against Renault plants
â˘
Competition with âNewâ Europe?
â˘
â Serious Japanese-led auto complexes in Czech Republic and (emerging) round St Petersburg
â Currently, not picking up anything like the Consumer Electronics migration East
(wearing my optimistâs hat) possibility that Japanese auto industry will see UK as
â˘
chosen European complex for up-market, complex auto developments
13. Contribution to High Value-Added
Model?
Recent Tory spokesmanâs claim that the Automotive balance of payments has
â˘
seriously deteriorated (since when?)
Will have to address these issues
â˘
Starting Point: the Rover/Ford/Vauxhall complex would have deteriorated
â˘
whatever the Japanese investment decisions
â The classic British components suppliers (Lucas et al) would mostly have gone bust anyway
â (Hats off to GKN for surviving)
But what has happened to the supply-chain arrangements of the Japanese Big
â˘
Three?
â Clearly some shift in sourcing to the rest of Europe
â But Japanese component suppliers still investing (?)
Development/design contributions
â˘
â Nissan Technical Centre Europe (was leading on the Almera by 2000)
â Nissan Design Europe (2003)
Have fed into Motor Racing
â˘
â Formula 1 (Honda)
â Subaru
14. The Current Crisis?
⢠Weâre seeing
â Some sackings (Nissan)
â Temporary factory closure (Honda)
⢠Currently seems that the pain is being shared
globally
â Japan doing worse than many?
15. How secure?
⢠Got long personal email from senior exec back in Tokyo
â 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?
â 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)
â (Export mandates?)
â Honda/Swindon is the âmotherâ plant for Turkish expansion
â Toyotaâs E-GPC (European â Global Production Training Centre)
⢠Production and Maintenance skills to European operations
â Nissan is only non-Japanese centre for developing and overseeing
[production/quality standards] in large parts of Nissanâs global
networks
16. Conclusions
⢠My gut feel is that the UK should be able to hold
on to a significant Japanese automotive cluster
â But that it will evolve
â Additional manufacturing investments will
increasingly go to East Europe
⢠The interesting questions will turn around the
UKâs ability to capitalise on next-generation skills
â Design
â Congestion/Environmental Management
⢠(London as a test for Electric Vehicles?)