Euro arbitrage/extortion

["Ian Murray" <seamus2001@xxxxxxxx>]

Nissan tells Blair 'join euro'

Oliver Morgan, industrial correspondent
Sunday May 27, 2001
The Observer

Carlos Ghosn, global head of Japanese car giant Nissan, has issued a
stark warning that British abstention from the euro will jeopardise
further investment and jobs at the company's Sunderland plant, which
employs 4,500.
In an interview with The Observer, Ghosn makes it clear that when the
company's next major European investment decision is taken - on where
to build the replacement for its mid-sized Almera - eliminating
exchange rate risk by siting production in the same currency zone as
its sales market will be his preferred option.

The timing of Ghosn's remarks is highly sensitive. The euro issue has
shot up the election agenda, exposing tensions in the Labour party,
while last week widely reported research from consultancy AT Kierney
indicated that exchange rate risk would undermine Britain's future as
a home to volume car manufacturers.

Ghosn said Nissan had not yet made a decision on where to site
European production for the replacement for the Almera, which is
currently made in Sunderland. A decision will be taken before 2005.
Nissan sources indicated 2003 was the earliest date.

Nissan's decisions would be influenced by whether Tony Blair had
called a referendum on the euro by that stage, and the success of his
campaign to persuade the public to vote yes.

Failure to invest would inevitably lead to job losses in Sunderland,
losses which would be blamed on the euro causing embarrassment to the
Government. In January Nissan chose Sunderland to build its new Micra
after tense negotiations with the Government over a £40 million aid
package. Currency risk was offset by the aid, steep productivity
improve ments and assurances that 65 per cent of transactions for
parts were in euros. If it had lost the Micra to the Flins plant in
France, operated by Renault which owns 36.8 per cent of Nissan, 1,300
jobs would have gone and a loss of at least that size could be
expected if the Almera replacement went elsewhere.

Ghosn recently made its clear that siting production within main
markets was Nissan's global policy. Last year Nissan made an operating
loss of Y27.8 billion (£163m) in Europe, driven by a Y65bn exchange
rate hit.

He admitted that Nissan was suffering from the decision in 1984 to
locate in Sunderland. He said: 'The next time we'll have to make a
decision is going to be the Almera replacement. A lot of companies
will go to the safe side.

'Why do you want to take a currency risk with the pound if you have
the possibility of being risk-free in the euro? Make no mistake, that
is what a lot of car manufacturers are saying.' Asked if he was one of
these, he confirmed he was.

Nissan sources said: 'It took a lot of work to build a package to
balance the currency risk. It would obviously be easier to build the
cars in the euro zone.'

Ghosn is pessimistic about European market outlook. Nissan expects the
market to contract by 2 per cent. Ghosn said that he feared the
situation could be worse than this.