Nissan repeats Sunderland threat

Carlos Ghosn says Nissan can cope with the strong pound only temporarily

Japanese car maker Nissan has repeated its warning that it may shelve a £150m investment in Britain because of the strength of sterling.

The intervention will add yet more fuel to the debate about whether the UK should join Europe's single currency and government support for manufacturing industry.

In the current environment, we are not in the best position to compete ... we cannot be in that kind of situation for more than a temporary period

Carlos Ghosn, Nissan president

Nissan president Carlo Ghosn said he was not planning to close the firm's Sunderland operations.

But output there - and possibly jobs - could be halved, if the company decides to move production of its new Micra car range elsewhere.

Mr Ghosn said: "We think there is a real threat that logically we could be brought to the conclusion that the best investment is not in Sunderland, but maybe somewhere on the [European] continent."

A decision on the new Micra model will be made by the end of the year. Sunderland rivals are Nissan's plant in Barcelona, Spain, and Renault car factories across Europe.

Aid package mooted

The Nissan Micra accounts for 58% of Sunderland's output

Nissan is producing the current Micra model at Sunderland, mainly for export to other European countries.

However, following the tie-up of Nissan with the French carmaker Renault, the two companies decided to use one 'platform' for both the new Micra and Renault's Clio.

With the pound strong and the euro weak, the Sunderland plant is having trouble selling its sterling-priced cars on the Continent.

Nissan's Sunderland factory employs 5,000 workers who build about 330,000 cars a year.

This makes it Europe's most productive car plant by far, but Nissan says this may not be enough to compete with factories in the single currency zone.

To make up for the shortfall in profits, the troubled Japanese company is reportedly holding out for a subsidy package worth about £100m ($150m).

Mr Ghosn acknowledged that Nissan executives were having talks with the UK government "at the highest level".

Pound worries

Nissan is just one of a number of foreign investors in the UK that have complained about the strength of the pound and asked the government to clarify its position on joining the euro.

Giving a state subsidy to Nissan may not be the straightforward way to solve the situation either.

When the UK government proposed an aid package to persuade BMW to keep the Longbridge plant of its Rover subsidiary open, rival car makers complained while the European commission launched a formal investigation.

And if Nissan gets some money, other car firms will want the same.

Last week a top manager of Toyota urged Britain to join the euro, and said if Nissan received aid, his company would ask for some too.

Nissan is Japan's third-largest car company, but has been struggling to cope with huge debts.

In March 1999, French car maker Renault took a 36.8% stake in Nissan and despatched its executive vice-president Carlos Ghosn to turn the company around.