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The Nissan Motor Company: Uk Project

Volume 416: debated on Thursday 29 January 1981

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3.55 p.m.

My Lords, it may be to the convenience of the House if I now repeat a Statement being made in another place by my honourable friend the Minister of State for Industry. My honourable friend's Statement reads as follows:

"With permission, Mr. Speaker, I would like to make a statement about the motor industry.

"The Nissan Motor Company has approached Her Majesty's Government to seek their views upon the company's intention, subject to a feasibility study, to establish a substantial car manufacturing operation in the United Kingdom. The Government have given a warm welcome to Nissan's proposal and are prepared in principle to give them their approval and support.

"Nissan's proposals are to start building a car manufacturing plant, including an engine manufacturing facility, in a Development Area or Special Development Area in 1982 and to begin production at the end of 1984, reaching the full figure of 200,000 cars a year by 1986.

"It is Nissan's intention to achieve a very high local content involving United Kingdom and other EEC suppliers; the local content at the start of production would be 60 per cent. and the company's objective would be to increase this to 80 per cent. as soon as practicable after full production is reached. The company is confident of achieving a high level of exports from the United Kingdom.

"The feasibility study is expected to last four months and to cover a range of matters, including location. Two matters of special importance in Nissan's decision will be the competitiveness of local component manufacturers and the prospects of establishing a good structure for industrial relations.

"The Government wish the company well, and hope the study will reach a satisfactory outcome."

My Lords, that concludes my honourable friend's Statement.

My Lords, I should like to thank the noble Earl, Lord Gowrie, for the brief Statement that he has repeated. He will of course appreciate that the matters, and indeed the principles, raised by this Statement are just as large as those raised by the Statement that he made last week concerning the future of British Leyland. I would therefore hope that the House will be afforded an opportunity to debate this whole question in very great detail. I had an uneasy feeling last week when I showered congratulations on the noble Earl in announcing his U-turn so far as British Leyland are concerned. I was a little suspicious at the time that there might possibly be a snag in it. Indeed, the snag has now emerged—the other side of the coin—because, of course, the Nissan Motor Company, the makers of Datsun, are apparently going to be accorded manufacturing facilities in this country.

A number of questions arise on this. It has been well known over a number of years that the Japanese have made very strenuous and successful efforts to penetrate into the United Kingdom market, and, indeed, into the EEC market generally. I am given to understand that negotiations have taken place with them with a view to the limitation of their imports into the EEC, and indeed into the United Kingdom, where there is a bilateral agreement already in force to that extent. I want to put it to the noble Earl: have the Government considered the possibility that this move may from the Japanese standpoint be merely one way of getting round the import ban on motor-cars into this country? I am well aware that the Government, in the words of the Statement, are:
"confident of achieving a high level of exports from the United Kingdom".
I would assume also that the Government have taken into account such extra vehicles that will come on to the United Kingdom market itself.

We on this side are well aware that any effort that is made to increase employment in this country is most welcome, particularly in this time of rising unemployment. But it will be of no benefit to the United Kingdom if employment is increased within this particular establishment that it is proposed to make in this country if at the same time unemployment occurs in British Leyland, Vauxhall, Ford or Talbot, which are established English companies. We should like to know whether the Government have given some thought to that aspect of the matter.

The other aspect is that it is the apparent intention of this company to establish its manufacturing capability in a development area or a special development area. I take it—and I should be grateful if the noble Earl will reply to this—that that means the company will be entitled to the full range of financial aids that are available to companies that establish themselves in these two types of area.

He will appreciate that under the existing regulations, and under the existing Act that deals with this question, sums as vast as £50 million or £100 million could be paid out to the incoming Japanese firm as part of the normal operation of financial assistance in the developing areas, and more particularly in the special development areas. I should be glad if the noble Earl could inform us of any estimate that he or the Government have made of the net increase in employment.

I should also like to know whether he has had any expressions of view, or whether there have been any prior consultations with, for example, Sir Michael Edwardes. After all, Sir Michael Edwardes has produced a plan for the production of BL cars and other vehicles covering the next four years. Was this one of the contingencies that was disclosed to Sir Michael Edwardes at the time that the plan to finance the BL operation was agreed? If the Government knew when they were having their talks with BL that they already had this other item up their sleeves, I wonder what the reaction of Sir Michael Edwardes would have been. Suffice it to say that in so far as we have been able to make contact with BL executives, the information there is one of considerable anxiety concerning the step that the Government have taken.

It is not proper on this occasion to delve into further detail because it would take too much time; but I trust that the noble Lord realises that we are dealing here with a very serious and important matter which extends far beyond the immediate relations between ourselves and Japanese industry.

4.4 p.m.

My Lords, we on these Benches should like to join in thanking the noble Earl for having repeated this Statement. We too wish to give it close study; but our first reaction is to welcome in general terms the prospect of more employment in a development or special development area, and to welcome also the intention expressed by Nissan to achieve a high local content, as the Statement has it, involving the United Kingdom and other EEC suppliers, and also a high level of exports from the United Kingdom.

There are some who will oppose this proposal because of its effects, real or imagined, on the British car industry. However, we on these Benches with our free trade background are in favour of having as few curbs as possible on international competition; and I would express the personal hope that this development will act as something of a stimulus to our own car manufacturers to improve productivity and, until such time as we can have an agreed long term incomes policy, for pay increases not to outstrip that productivity.

I have two questions to ask, both of which are related to the comments which have already been made by the noble Lord, Lord Bruce of Donington. We too have noted that there is no reference in this Statement to the question of money. Apart from the particular point made by the noble Lord, Lord Bruce, in relation to grants available to employers in special development and development areas, may we take it that the absence of any reference to money in this Statement means that, at least in the preparatory stage, during the course of the feasibility study, no question of Government expenditure arises? If it does, perhaps the noble Earl will quantify it so far as he is able.

The second question is really to pin down a little more closely what the noble Lord, Lord Bruce of Donington, was saying, as I understood it. Do the Government have in mind somehow to ensure that the actual construction of this new plant, if that is to take place, should be made conditional on Japanese cars in future being imported into the United Kingdom only if that is done in strict accordance with an agreed quota?

4.7 p.m.

My Lords, while I certainly agree with the noble Lord, Lord Bruce of Donington, that this is a serious and important matter, it takes a certain perverse genius on behalf of the noble Lord to look upon it as a snag. I can only say "Some snag"! He asked for an estimate of what the employment effects might be if, as a result of a feasibility study, this project were to go ahead. It is very hard to quantify and I think that I might mislead the House if I tried. But let us say that I would certainly expect it to be in excess of 20,000 jobs, which is a considerable amount in any industry at this time.

The noble Lord, Lord Bruce, raised the issue of British Leyland and wondered—to put it in shorthand—whether we might not be robbing Peter to pay Paul in this regard. I do not think that this could be the case, for with car production at its lowest for 23 years and with import penetration at a record 57 per cent. it would seem to me that there is plenty of room in this country for them both. From all I know of Sir Michael Edwardes, he is the last man to be afraid of competition. He is in any case, as is known, already in collaboration with another Japanese manufacturer, Honda. Indeed the whole nature of the motor car industry nowadays is for very considerable cross-border and cross-national competition.

Both noble Lords referred to the effects of this project, if it goes forward, on the inter-industry agreements about the limitation of Japanese manufactured motor cars. The Government continue to attach great importance to the continuation of voluntary restraint on direct imports and we monitor these all the time. There is no reason for any change in this as a result of Nissan's intentions to invest in the United Kingdom. On the question of Government financial assistance, again, these are early days with the feasibility study, which will be paid for by Nissan, to quantify what that might be. It would be the same as any inward investor or any British company, and of course the whole structure of regional aid is geared to achieving substantial net benefits. I do not think there should be too much concern there.

Of course I recognise that there has been much criticism of the level of Japanese imports into Europe and of the tendency of Japanese industry—from which we have a great deal to learn—to operate centrally and with great speed and adaptability. In this case I think I can say that Nissan is responding in the best possible way because its proposed development is to become a fully-fledged European producer, and that I think we can only welcome.

My Lords, since it is more than two years since I left the board of Datsun UK and therefore I have no interest to declare, may I ask my noble friend whether he would not agree that this means not only new investment but new jobs, new exports and a new stimulus to the industry as a whole? May I also ask him whether the 20,000 jobs to which he has referred represents 20,000 in direct employment or 20,000 direct and indirect together?

My Lords, I very much welcome my noble friend's robust reception of this and his recognition that this is thoroughly good news—the best news for a long time. I want to back-pedal a little bit on the figure of 20,000. It could well be more, but it is not direct employment: that would be substantially smaller, though still on a significant scale for today. The figures in the higher thousands, if I may put it that way, are based on the intention to achieve a very high local content in this new European manufacturer, but that of course depends on other things being equal and other things going well, upon the state of the components industry, the state of industrial relations, and so on. But, as I say, we hope this will come off and the Government can only wish this project, now in its early stages, every good fortune.

My Lords, would my noble friend not agree that it is to some extent natural that at this moment there should be some people in the country who will be worried, whether it is Japanese or German industry coming into this country? I have no doubt that at the beginning of the last century, if there were American imports coming into this country after the War of Independence, there would have been resistance to that too. Would my noble friend not agree, however, that the vast impact of overseas investment, whether it comes from America or any other place, has had a terrific impact on this country, not only on employment but on all sorts of trade union and management problems, and has done nothing but good? Would he not agree that we have to accept these things and hope to grow with them?

My Lords, I very much share the view of my noble friend. These things do represent a two-way traffic and Britain is a very substantial investor overseas and we earn much of our living through overseas investment. I would hope, as I have said on many occasions, that now there is a new spirit of realism, to use shorthand, within British industry we would attract a great deal more inward investment. It seems an excellent time to come into this country, and I am very glad to see that this is the largest proposed Japanese investment ever in Europe.

My Lords, would the noble Earl confirm what he seems to have been telling us, that there has been no budget prepared of the total expenditure of Her Majesty's Government and the amount they might have to put into this enterprise, however good or bad it is? We have not had an answer to any of the questions that have been asked. I am not commenting on the total benefit but it would be interesting from the national economy point of view to know how much money Her Majesty's Government are investing in this one project.

My Lords, with great respect to him, I do not think the noble Lord understands the nature of regional aid in this country. It is only ever possible to achieve regional aid if, in the Government's judgment, there should be a benefit accruing; and that is the same whichever Government arc in office. The other point which I do not think he has altogether taken on board is that at the moment we are talking about a feasibility study. Obviously Nissan have to decide whether to go ahead on the basis of feasibility and so have the Government.

My Lords, may I just add one word of welcome for the Statement made by the Minister? In particular I think we should welcome the mark of confidence in the industrial future of this country which is so badly needed at the present time.

My Lords, may I just add my strong support to the information given in the Statement by my noble friend Lord Gowrie, declaring an interest as a director of a British-owned company that has operated in Japan for at least 10 years? This is not a one-way movement. We live in an extremely flexible world and we must recognise that. I believe this is an encouraging thing, in so far as we know what it is about. On the evidence of my own company, one can grow in other places as well.

My Lords, I am grateful for the point made by my noble friend, with which I partly agree and I am also grateful for the point made from the Cross-Benches by the noble Lord, Lord Roberthall: this is a very substantial vote of confidence in the industrial possibilities of this country by a major industrial country. Also, of course, it follows other substantive Japanese investments in other branches in this country; so it is a vote of confidence based, I would say, on experience.

My Lords, if I may also add to the general thanks which have been—

My Lords, on a point of order I think that at this stage we should have only questions to the Minister and not statements.

My Lords, may I ask my noble friend whether he can he totally assured that the local content, not only of labour but of materials, can be sustained? May I also ask what kind of assurances those are? Would he not agree that anything below 80 per cent. of material content at the start would be extremely damaging to our own components industry, which is already in decline and employing 350,000 persons? Can he also say whether or not the design centre for the new product is to be based in this country and at the place of development? Were it elsewhere—in Japan, for example—would he not agree that much of the advantage would be lost?

Finally, what assurances can he give to substantiate the rather vague estimates of employment, in so far as we know that a new motor assembly plant will be almost totally automated, so reducing the labour content?—and in such circumstances it would inevitably employ highly-skilled labour from the parent company where the technique is already well-known and practiced.

My Lords, I have noted, though it is not really a matter for me, the great interest in this Statement and also in the Statement I made earlier during this week on British Leyland. Perhaps it might be better if these issues were taken on in a debate, although that of course is not a matter for me. If I may just answer my noble friend's points very quickly and in outline, we would find it perfectly satisfactory for a 60 per cent. initial local content, with the objective of increasing this to 80 per cent. I cannot answer the design point, but I will look into it.

My Lords, does the noble Earl agree that it would be a mistake to impose more rigorous conditions in permitting Japanese firms to establish subsidiaries here, than we require from, for example, American firms? Particularly in some of the engineering industries, such as the motor industry, the Japanese are now much ahead of the Americans and, indeed, the American industry is very severely threatened by Japanese competition in America itself. It is clearly very much in this country's interest that we should have efficient Japanese-owned enterprises here. There will be a fall-out effect from that, which can only have a good effect on British industry.

My Lords, I am delighted to hear that from the noble Lord, Lord Kaldor, as he is—I am sure often unfairly—sometimes associated with trade wars, protectionism and the like. Of course Japanese companies are welcome here. They are already here. But this proposal of their most substantial investment in Europe so far, on the same terms as other foreign firms and on the same terms as our own domestic firms, is generally for the good of everybody.

My Lords, will my noble friend give way? This is rapidly becoming a debate. I think it would be to the convenience of the House if we moved on.