Regional Selective Assistance
61. On 25 July 2000 the UK authorities notified
the European Commission of their offer to Nissan of a Regional
Selective Assistance grant of £40 million to help meet the
estimated difference in costs of £79 million of producing
the new Micra at Washington rather than Flins. Two months after
receiving this notification, the Commission decided on 20 September
2000 to open a formal state aid investigation procedure, as is
now a more or less standard procedure in such cases.
62. On 29 September 2000 the Commission
forwarded to the UK authorities a detailed paper setting out a
number of questions to which it required answers, including whether
it was likely that Nissan would abandon so much of its previous
investment in Washington; the extent to which Washington could
be profitable if running at barely half capacity and producing
only the Primera and Almera; the potential loss of UK customer
loyalty in the event of Micra production on the continent; and
the practical feasibility of producing the planned output of new
Micras at the Flins plant.
63. There were no objections to the proposed aid
from other Member States or from other companies. The DTI evidently
gave satisfactory answers to the reasonable queries raised by
the Commission. On 16 January 2001 the Commission, at its first
meeting after Christmas, authorised the proposed aid.
64. The process of discussion between the parties
seems to have altered some of the underlying figures. The Commission's
29 September 2000 letter shows the original cost difference between
the two sites of £79.2 million as representing 42.7% of the
net present value, recorded as £185.3 million, of the proposed
eligible investments Nissan were to make in machinery and equipment
and supplier tooling. This is known in Brussels state aid-speak
as the "handicap intensity of the project". Commission
Press Notice IP/01/63 of 17 January 2001 stated that "the
final intensity of the regional handicap, i.e. the extra cost
for locating the Micra production in Sunderland rather than in
Flins, came to 32.48%". Either the net value of eligible
investment to be made by Nissan has risen; or there has been a
substantial reduction in the estimated extra cost of locating
the new Micra in Sunderland; or both.
65. We were of course delighted to learn on 25 January
2001 that the new Micra is to be produced at Washington, safeguarding
the existing jobs at the plant and possibly creating more. The
first car should come off the lines in late 2002. The 30% cost
reduction programme and the purchasing policy "designed to
minimise the present negative impact of the unfavourable currency
exchange rate"[86]
will of course bear down heavily on UK-based component suppliers.
But a 35% UK content Micra assembled in the UK is a lot better
than no Micra. Whilst the UK is likely to be the largest single
national market for the car, it is intended that around 70% of
the output will be exported. The new Micra will have access to
the Europe-wide Renault network. The '555' campaign slogan of
5,000 employees on a 5 day shift making 500,000 cars can now become
a reality. We hope that, when a similar decision comes to be made
in a few years time about the Almera, it will have an equally
satisfactory outcome.
Good news
66. Some recent developments put the future
of the industry in a less gloomy light than the Dagenham and Luton
decisions —
- Jaguar: the termination
of Ford Escort production at Halewood on Merseyside, and the decision
a few years ago not to produce the Ford Focus there, might have
constituted a serious blow to UK vehicle manufacturing. But it
has been followed by the successful launch of the new Jaguar X
Type compact sports saloon, albeit in substantially lower volumes
than the Escorts. Halewood is to be the sole source of what is
intended to be a mass market car with good export potential. Jaguar
sold 85,000 cars in 2000 and now has a four model range. The Jaguar
plants at Castle Bromwich and Coventry may be increasing their
production. We hope that the new F Type 2-seater Jaguar, destined
in particular for the North American market, will be produced
in its natural home, in the UK. The prospects for Ford's production
in the UK of cars within its "premier" brand, including
the Aston Martin Lagonda, seem bright;
- Land Rover: Ford are
to invest £130 million in Land Rover to the end of 2001,
and plan to raise production from the 175,000 vehicles produced
in 2000 to 270,000 a year within the next five years, employing
9000 people at Solihull, and exporting around 70% of production;
- Vauxhall: Vauxhall's
Astra plant at Ellesmere Port is prospering and there is some
reason to hope that General Motors will do its best to ensure
that the successor to the Astra will be produced there, although
in the wake of the Luton decision it is difficult to take any
undertakings or assurances at face value. It may well be that
Ellesmere Port will be equipped as the "flex-plant"
for the new Vectra.[87]
Frontera assembly is to be retained in the UK, albeit in reduced
numbers and at its present site at Luton rather than in Ellesmere
Port as was planned in May 2000, in the face of competition —
described by Vauxhall's Chairman in June 2000 as "a close-run
thing" — from other sites including Finland and Turkey;[88]
- MG Rover: although
there is a long way to go, the Longbridge operations of the MG
Rover group have now survived for over six months. It has been
reported that for the first time they had increased market share
and that the Rover 75 was selling well;
- Peugeot: Peugeot are
producing the Peugeot 206 at the Ryton plant in Coventry as fast
as they can, in response to high consumer demand; over half of
the output is exported. Although future prospects may have been
clouded by the announcement on 14 December 2000 by PSA Peugeot
Citroen of an intensive review of plans for the new paint shop
due in 2003, said to be crucial to the future of the plant, the
strengthening of the euro against sterling may help assure the
future of the plant;
- Honda: Honda are engaged
in expanding the productive capacity of their Swindon plant in
preparation for the introduction of either new models or —
as now seems likely — higher production of some existing
models. It is reported that the 3-door Civic to be assembled there
is for export to Japan;
- Nissan: Nissan's plant
at Washington began production of the new Almera in 2000 and continued
its production of the Primera, against potential opposition from
Japan. The plant remains the most efficient and productive plant
in Europe. The January 2001 announcement that the new Micra would
be assembled there is a major boost to the industry;
- Toyota: Toyota announced
in January 2001 that it would be transferring production of the
3 door Corolla model from Japan to Burnaston by the end of the
year, raising production at the plant from 170,000 to closer to
its full capacity of around 220,000 a year, and creating extra
jobs at Burnaston and the Deeside engine plant;
- BMW: BMW will shortly
begin full-scale production at Cowley of their new Mini, aimed
at a North American and Europe-wide market: they are also planning
a new and advanced plant at Goodwood in Sussex for the annual
production of around 1,000 Rolls-Royce cars;
- Bentley: VW are reported
to be considering an increase in the annual production of Bentleys
from 2,000 to 9,000;
- commercial vehicles:
the UK commercial vehicle business, including buses as well as
trucks and vans, is looking in better shape than for some years,
with new investments, for example by ERF at Middlewich, Cheshire.
The transfer to Leyland in Lancashire from Eindhoven of
all 65 Series Leyland DAF truck production will lead to production
volumes at Leyland increasing by 30%.[89]
The Ford Transit plant at Southampton, which the unions told us
had been near closure in the recent past, is now engaged in full-scale
production of the new Transit, as we heard on our visit there.
Subject to the plant being able to produce vans of a quality equal
to or above those produced at the comparable plant at Genk in
Belgium the plant should have an assured future for some years,
producing for export as well as for the domestic market.[90]
At Luton, investment is under way in preparation for production,
mainly for export, of up to 80,000 Vivaro vans a year in a joint
venture between Vauxhall's IBC company and Renault;[91]
- recreational vehicles:
recreational vehicles such as Land Rover, Frontera, and Honda's
CRV are manufactured in growing numbers in the UK for export to
elsewhere in Europe and to the US;
- motorsport etc: the
motorsport industry is thriving, generating thousands of jobs
directly and indirectly.[92]
A recent report suggested that the scale of wealth created and
of employment in this sector had not even now been fully appreciated.
The smaller specialist UK manufacturers are also thriving.
79 Q 425 Back
80 Ev,
p 128 Back
81 ibid,
p 127 Back
82 ibid,
p 128 Back
83 Qq
426ff Back
84 Q
438 Back
85 Ev,
Appendix 19 Back
86 Nissan
News Release, 25 January 2001 Back
87 See
paras 41-2 above Back
88 Qq
135-6 Back
89 Ev,
p 89 Back
90 Q
73 Back
91 Q
134 and see para 36 above Back
92 Ev,
pp 115-8 Back
