Sunderland awaits Nissan decision

Nissan's Sunderland plant would need huge investment

Workers at Nissan's UK plant at Sunderland will learn shortly whether their factory has won a key contract, safeguarding thousands of jobs in the country's beleaguered car industry.

Members of the Nissan board are expected to vote this week whether to award work building the new Micra model to its main UK site, or to a factory in France.

The decision will affect not just Nissan's 4,900 workers in Sunderland, but the whole of the UK's ailing car industry, and indeed the credibility of a government that has worked to secure the contract for Britain.

Nissan is also pondering whether to upgrade the current facilities at the plant. According to a report in the Financial Times, Sunderland could receive a £600m investment regardless of whether it will be awarded the Micra work or not.

Inside or outside the eurozone

A week ago the government won permission from the European Commission to give Nissan's UK operations a £40m grant.

But Nissan head Carlos Ghosn, who has earned a reputation as a tough operator, has warned that the grant, and even the plant's reputation as the most efficient car factory outside Asia, may not be enough to win the work for Sunderland.

Giving the work to the Flins plant on the outskirts of Paris would secure Nissan's relationship with its parent company Renault.

Carlos Ghosn: 'Le Cost Killer'

Indeed, the new Micra will be the first car built around a common Renault-Nissan platform.

And, as Mr Ghosn has oft-repeated, placing work outside the UK allows Nissan to avoid the foreign exchange risks involved in operating in a country outside the eurozone.

Nissan has estimated that, thanks to sterling's strength against the European single currency, producing the car at Flins would be 30% cheaper than making them in Britain.

And Mr Ghosn, who has achieved a turnaround at Nissan since being appointed in 1999, has earned the nickname "Le Cost Killer" over his enthusiasm for reducing overheads.

He is believed to have questioned the government closely over plans for adopting the euro in place of sterling - and a decision to favour Sunderland over Flins would be seen by many pundits as a sign that the Blair administration views the currency switch as a pressing priority.

'Detestable conditions'

But a vote for Sunderland may also reflect the renewed strength of the euro, which has this month hit six month highs against sterling, so eating into Flin's exchange advantage.

The conditions at Flins are already detestable. We don't need more work, there's too much of it

Philippe Martinez, union head, Renault

Also, although Nissan would need to spend some £200m upgrading UK production facilities for the new Micra, the Flin factory would require investment of some 4bn francs (£389m, 610m euros).

And while Nissan's 4,900 workers in Sunderland are desperate to win the work, which would safeguard an estimated 1,200 jobs at the plant, employees at Flins have remained less than enthusiastic about the contract.

"The conditions at Flins are already detestable," says Philippe Martinez, head of the CGT union at Renault.

"People are flexible - they work long hours in very difficult conditions. We don't need more work, there's too much of it."

Strike ballot

Nissan directors are meeting in the same week as General Motors workers throughout Europe hold a day of protest in support of workers at the firm's UK subsidiary Vauxhall, which is to cut 2,000 jobs.

Vauxhall employees are from Tuesday to be balloted over strike action, with a result due early next month.

A decision by Nissan to back Flins would only exacerbate industrial unrest among UK carworkers reeling from job losses announced last year by Ford as well as Vauxhall.

In a year expected to host a UK general election, it would be unfortunate for Prime Minister Tony Blair to see the north-east of England, the region to which he owes his parliamentary seat, provide him with a headache too.