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Thursday, 25 January, 2001, 12:54 GMT
Q&A: Why Nissan chose the UK

The new Nissan Micra is to be built in the UK after all - but what swung it in the end? BBC News Online asks Professor Garel Rhys, director of the centre of automotive industry research at Cardiff University Business School.

Why has Nissan chosen Sunderland?

Sunderland is the most productive car plant in Western Europe. It really is very very efficient.

That extra efficiency is more than enough to compensate for any exchange rate problems. And that is why Sunderland won the day.

The UK also has a very flexible labour market, a lack of regulation compared with Europe.

Despite the common complaint about all the red tape in Britain, it really is much simpler to do business here - companies can fire workers far more easily and can downsize if they need to. In Europe, employers often find their hands are tied.

I wasn't surprised at the decision - the battle was very keenly fought and it really could have gone either way.

That 40m grant from the UK government would have helped but at the end of the day it wasn't a key factor.

Is there a price to be paid?

Nissan's British management have had to promise to meet tough cost-cutting targets to land the deal.

Nissan is hedging its bets with the exchange rate by stipulating that cheaper car components must be bought in the eurozone.

So the new Micra will have a far smaller British content than its predecessor. This will have huge implications for the British components industry.

In the previous Micra, 72% of its components were made in the UK. Now that proportion will be just 55-60%. And component manufacturers in Britain will lose out to the tune of 100m a year.

What does this all mean for the workforce?

Nissan's Sunderland workforce have already agreed to go onto a new, more flexible shift system. This decision means they will probably activate it.

They will boost production gradually to half a million vehicles a year.

Sunderland will be by far the biggest car assembly operation in the UK. It will also be one of the largest in Europe.

They will need extra workers - about 500 of them - but most of the labour that is needed will come from making the shifts of the existing workforce more flexible.

Longer term, what is the significance for the British car industry?

The recovery of the British car industry is well underway from the dark days of the 1980s.

The industry had already turned a corner, but we the British public didn't believe it.

Ford and Vauxhall - which have announced the closure of car plants at Dagenham and Luton respectively - have had their own particular problems, but it didn't mean that the future of the entire British car industry was in jeopardy.

The benefit of Nissan's decision is to renew confidence in the UK as a longterm centre of vehicle production.

The car assembly plant at Sunderland is safe, but a question mark does now hang over the British components industry.

It is quite clear that in many ways this was an exchange rate decision.

Britain's entry into the eurozone is several years off.

So Nissan had to be innovative and put its own strategy in place to try to live with the strength of sterling.

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