Nissan chief warns sterling's strength may hit UK project

Nissan has joined a chorus of criticism from the world’s leading carmakers about the strength of sterling, shaking Britain’s reputation as the location of choice in Europe.

Echoing complaints from Ford, General Motors, Honda, Toyota and BMW of Germany, Carlos Ghosn, Nissan’s president, said the strong pound was forcing the company to consider shifting new investment to the euro-zone.

His comments, in an interview with the Financial Times, put a cloud over the future of Nissan’s plant in Sunderland, the most productive car plant in Europe. It also adds to the pressure on Tony Blair, British Prime Minister, to make a firmer commitment to joining the euro.

Carmakers in Britain have blamed the euro’s persistent weakness against sterling for undermining their profitability in Europe. Nissan lost Y38.1bn ($36bn) in the region last year.

Mr Ghosn said Nissan had no intention of closing the Sunderland plant, but said currency issues could jeopardise a potential L150m expansion of the site. He is leading a Y1,000bn worldwide restructuring of Nissan.

He said the Sunderland plant which employs 5,000 people and thousands more in the supplier industry faces its biggest threat since opening in 1986. Mr Ghosn is to hold meetings over the plant’s future with the British government “at the highest level” – a reference to Mr Blair. Stephen Byers, Trade and Industry secretary, is also expected to be involved in the talks.

Any decision by Nissan to scale back output and investment at Sunderland would be a blow to Labour’s northeast heartland, home to the constituencies of both Mr Blair and Mr Byers.

Mr Ghosn said Nissan would decide by the yearend whether to build its next generation Micra small car at Sunderland. “The logical place for Micra is Sunderland, but we cannot make a decision until we have some guarantees we can count on for the future,” he said.

If Sunderland loses the Micra project, the likely beneficiaries include Nissan’s Barcelona plant or factories operated by Renault, the French carmaker that owns 36.8 percent of the group. Mr Ghosn, Renault’s former chief operating officer, hinted that Nissan would have already decided to build the new car outside the UK had it not been for Sunderland’s productivity record.

Mr Ghosn applauded plans to cut costs by 30 percent over the next three years, but said “the environment of the plant is worrying. We cannot stay in a position where every six months we have a crisis”.

Nissan officials indicated that production at the Sunderland factory – one of the UK’s flagship inward investment projects – could fall by almost 50 percent if the Micra was built elsewhere.

The plant currently produces about 330,000 cars a year and had hoped to lift output to more than 400,000 with the new Micra. Reuters