Sanjoy Sen is a chemical engineer. He contested Alyn & Deeside in the 2019 general election.
It’s pretty hard to find a negative angle on Nissan’s recent commitment to its Sunderland plant. A £1 billion investment will see an all-new electric model built there supported by its partner’s new battery plant. In all, this looks set to create over 900 new jobs plus over 4,500 in the supply chain.
As I discussed in terms of the Vauxhall plant at Ellesmere Port, government support has always been key to major investments: it happens worldwide.
But what’s most encouraging about the Nissan story is that it suggests some important lessons have been learned from the past. Whilst certain previous mistakes sit squarely with industry, other failures have highlighted the need for an ongoing relationship with government.
For what can go wrong, look no further than another Japanese car giant, Honda, whose Swindon factory will sadly close its doors this month. Things could have been very different, of course. Honda was brought in as a partner to save British Leyland in the early eighties. And for a decade, both Rover and Honda flourished. But Rover was ditched by the state, moved on repeatedly (from British Aerospace to BMW to the ‘Phoenix Four’) and failed in 2005. Meanwhile, poor European sales forced Honda out of Swindon.
What didn’t cause Swindon’s demise?
One factor we can take off the table early is Covid-19. Honda’s decision came well before the decimating impact of lockdown on car sales. Key factors cited by Honda for closure were major changes in the global car market including electrification, a trend the company has been left behind in.
Those opposing Leave may contend it was Brexit that dented Honda’s confidence and its EU exports. But reality is more complicated: whilst Swindon has been operating at half-capacity for many years, the UK’s two, much larger Japanese car plants, Toyota (Derbyshire) and Nissan (Sunderland) were running at consistently high output until 2020’s extraordinary events.
A bright start
Following unsuccessful government talks with American and French manufacturers, Honda was invited in as a final shot at reviving BL and eventually returning it to private ownership. Perhaps worth remembering next time you hear that Margaret Thatcher didn’t care about British manufacturing, never intervened and left everything in the hands of the market.
The 1981 Triumph Acclaim was little more than ‘Europeanised’ Civic, but even die-hard traditionalists admired its faultless quality. A series of new models followed and, by the early 1990s, Rover had a strong-selling range (British style backed up by Japanese reliability), and was finally profitable again. Hondas were also in demand; having won Formula One six years on the bounce, the Japanese looked set for the same image-sales trajectory as Audi and BMW.
What could possibly go wrong from here?
At the first sign of recovery, the 80 per cent state holding in Rover was off-loaded to British Aerospace in 1988. But as losses mounted in the parent company, BAe dumped Rover on to BMW in a shock 1994 sale.
Often derided as asset-strippers, (interested only in Land-Rover know-how and the Mini badge), the Germans initially invested strongly – but not necessarily wisely. As the ‘English Patient’s’ losses threatened to drag down its Bavarian owner, the give-away to the ‘Phoenix Four’ spared BMW the fall-out of shutting Rover themselves.
What then went wrong for Honda is down to the bit governments can’t help with: making things people actually want. Rivals Toyota are cleaning up with their hybrids, whilst Nissan’s Qashqai is a strong export seller and the company is expanding rapidly in EVs.
But as a fiercely independent outfit, Honda made for the exit as BMW arrived, and were soon left high and dry. Whilst excelling in America (holding 10 per cent of a sizeable market), their independent Swindon products never cracked European tastes, thanks to decisions that made BL appear almost sage-like: unrealistic pricing, missing key models, surrendering the lead in hybrids/EVs.
Critically, halving Swindon’s capacity to just 150,000 units per year (less than half of Nissan Sunderland) following the 2008 financial crash stripped the site of large-scale efficiency.
How might things have been different?
There are clearly no ‘silver bullet’ solutions for government. Had the UK’s numerous auto-manufacturers (Austin, Morris, MG, Rover, Triumph et al) remained proudly independent, they risked being crushed by larger, foreign competitors. Yet forcing them together saw them fail collectively. And shoring up loss-making domestic car giants is increasingly proving a headache for governments worldwide.
Instead of an early sale to BAe, further cultivation of the Honda relationship, with a staged reduction in government stake, might have benefitted all parties. And in an industry characterised by mega-mergers, it’s unrealistic to imagine that Rover could have remained wholly independent. But, equally, it’s not unthinkable that they might found themselves part of a global portfolio and retained UK production – again, with strategic support from government.
Today’s news from Nissan is highly encouraging, but let’s not believe that government interaction ends today. Things are looking good right now but markets and techonologies change quickly. We need to be ready to respond.