- 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.

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
– 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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?)