Market Focus : When Is a Nissan Not Really a Nissan? : The question may seem like a riddle but it’s an important issue to European trade officials. They’re uncertain whether to classify Nissans made in Britain as friend or foe.
It says “Nissan” on the grille. It looks like a Nissan, feels like a Nissan and drives like a Nissan. But could it be--a British car?
The riddle has been dogging European trade officials since Japan’s No. 2 auto maker, Nissan Motor Corp., started producing its standard Bluebird model in a new factory here four years ago. The issue is heating up as Western Europe nears its goal of economic unification by the end of 1992.
Nobody disputes the fact that the 77,000 passenger vehicles that rolled off the Sunderland assembly line last year were made by British workers, or that about two-thirds of the components came from sources in Europe. But a bitter quarrel has raged over whether to classify the product as friend or foe.
The French and Italians are leading the fight. They say that Japanese car makers aim to exploit their new British production facilities, that it is a Trojan horse scheme for attacking the European auto industry from within.
They advocate keeping protective quotas on Japanese car imports, which, in principle, are to be abolished after members of the European Community integrate their economies in 1992. They also want to label the British-made Nissans products of Japan. The same would go for locally made Honda and Toyota models that soon will start streaming into the European market.
The West Germans and the British, however, have been waving the flag of free trade--more or less. They counter that Japanese competition is good, because it will strengthen European industry, and that investment in local production should be encouraged because it would bring technology and jobs.
But now, even Japan’s free-trade patrons have softened their stance.
On June 19, the 12 trade ministers of the European Community countries met in Luxembourg and reached what one spokesman described as an “apparent consensus” that transplant production within Europe should be treated the same as imports from Japan. For a “transitional period” after 1992, the more cars Japan produces in Europe, the fewer it should be allowed to import to Europe from Japan, the ministers announced.
The Japanese auto industry, understandably, balked at that announcement. After some apparent backtracking, the EC’s official position is far from clear, but indications are that, to the Europeans, a Japanese car is a Japanese car, no matter where--or how--it is made.
No such restrictions are being contemplated for Ford or General Motors, both of which make about 1.5 million vehicles annually in Europe.
“I don’t understand how they can distinguish between a brand name called Nissan and a brand name called Ford,” said Ian Gibson, managing director of Nissan Motor Manufacturing (UK) Ltd. “It’s not a matter of targeting origins any more. I don’t see how this could be possible.”
Gibson, a former Ford man, joined Nissan in 1984 and replaced a Japanese top executive at the Sunderland plant a year ago. He said that Nissan is carrying out an intensive program to localize itself as a “European company,” much as Ford did over the past 50 years.
Although the first Bluebirds were about 40% local parts when Nissan began assembling them here in 1986, Gibson said that when Nissan UK’s new mid-sized Primera goes into production later this year, perhaps 80% of it will be from European suppliers.
“We’re confident that the vehicle is going to be so localized that, in the end, we’ll have no trouble with the Europeans,” Gibson said. “By the late 1990s, we’ll be designing our own models.”
Nissan has established a research and development facility, and British engineers already have adapted some of the design elements of the Primera to the European market. They are working on a four-wheel-drive vehicle that would be the first “Japanese” automobile fully designed in Europe. Only its engine and transmission are to be designed--and made--in Japan.
The plant employs about 2,500 people in Sunderland, a depressed shipbuilding town in northeast England. About 30% of the assembly workers were unemployed when Nissan hired them, and the plant is rapidly expanding. Plans are to hire 1,000 more workers by 1992.
Nissan’s goal is to build 100,000 Primeras in 1991 and add another model in 1992, to double production to 200,000 units a year. By 1993, half of these cars will be going to other EC countries.
Toyota, Japan’s largest auto maker and the third largest worldwide, is in hot pursuit. Last spring, it announced plans to build a $1.2-billion plant in Derbyshire to produce 200,000 cars by the mid-1990s.
Honda has teamed up with Britain’s Rover Group to build a $540-million plant in Swindon with 100,000-unit capacity. Mitsubishi Motors has said it will forge a “cooperative relationship” with West Germany’s Daimler-Benz, and Mazda has announced plans to build cars in Europe with Ford.
With sales unlikely to grow in the saturated car markets both home and in North America, the Japanese are counting on selling more autos in post-1992 Europe, where they currently hold a combined market share of about 10%. Having learned some hard lessons about trade friction with the United States, they see local production as the only certain means of expanding volume.
This strategy has been regarded with no small amount of hostility, especially in France, home to two of Europe’s four largest auto manufacturers, Peugeot and Renault.
Japanese car makers’ “final aim” is to “conquer market share and then kill,” Edith Cresson, French minister for European affairs, told reporters after an EC ministerial meeting in Brussels earlier this year. She cited the U.S. market, of which the Japanese have a 25% share, as an example of the clear and present danger for Europe.
“If the Japanese want to invest, that’s fine,” Cresson said, “but they won’t invest, once they have destroyed the market.”
The split within the EC over Japanese cars reflects deeper divisions over economic philosophy and on European unity. Last month, Nicholas Ridley, then British minister of trade and industry, caused a furor by comparing the EC Commission to Hitler and calling market integration a “German racket designed to take over the whole of Europe.” Ridley was quickly forced to resign.
The awkwardness over Japanese automobiles, however, shows no sign of fading away.
The EC’s external affairs commissioner, Frans Andriessen, was expected to begin preliminary negotiations with the Japanese this summer to iron out a voluntary restraint agreement that would temporarily protect the European auto industry from Japanese imports after 1992. Five EC countries--including Britain--have quotas on cars shipped from Japan, and these would eventually be phased out, perhaps over five years.
But the signals the EC put out earlier in June, suggesting that offshore car production would be included in any voluntary-restraint quotas, drew howls of protest in Tokyo. The discord appears to have delayed negotiations.
“The Japanese industry is obviously confused,” said John Lawson, an auto analyst for the Nomura Research Institute in London. “It thought it had a strategy for 1992, but now it can no longer rely on localization as a means of satisfying Europe’s requirements. This is a classic case of moving the goal posts.”
Michael Lake, spokesman for the EC, said he is not sure exactly what the EC’s position will be when formal talks begin. Other than the “apparent consensus” announced in June, nothing official has been decided, he said.
“It’s messy,” Lake said. “I wish things were more clear-cut.”
Confounding the issue is the double standard that spares U.S. auto makers from the fear and loathing being focused on the Japanese. To be sure, car imports to Europe from the United States are few, but only because the Americans are well established within Europe after decades of localization.
“Nobody takes Ford as being a non-British company. It’s been here so long, it’s a standard brand name to us,” said David Morris, an analyst with the Anglo-Japanese Economic Institute, which is supported by the Tokyo government.
“But there’s still a residual sense of suspicion about why the Japanese are investing here,” Morris said. “There’s almost an unspoken assumption that there must be something underhanded behind it.”
The ultimate test of what constitutes a “Japanese car” may come later this year. Honda has said it plans to start shipping Accord station wagons--made at its factory in Ohio--to the European market. Perhaps Honda figures that its American-made cars will not run into the same obstacles as those from Britain.
Japan’s Market Share in Europe EUROPEAN COMMUNITY’S NEW PASSENGER CAR REGISTRATIONS (in millions):
1987:
Other manufacturers: 10.88
Japanese manufacturers: 1.38
1988:
Other manufacturers: 11.53
Japanese manufacturers: 1.46
1989:
Other manufacturers: 12
Japanese manufacturers: 1.46
SOURCE: Industry figures, Integrated Automotive Resources, “Fast Track News”
PRIVATE CARS AND LIGHT COMMERCIAL VEHICLE IMPORTS 1988 (in thousands):
Belgium/Luxembourg:
Japanese cars registered: 102
Total cars registered: 491
Denmark:
Japanese cars registered: 38
Total cars registered: 107
Spain:
Japanese cars registered: 45
Total cars registered: 1,203
France:
Japanese cars registered: 74
Total cars registered: 2,600
Greece:
Japanese cars registered: 34
Total cars registered: 78
Ireland:
Japanese cars registered: 33
Total cars registered: 74
Italy:
Japanese cars registered: 44
Total cars registered: 2,323
Netherlands:
Japanese cars registered: 150
Total cars registered: 525
Portugal:
Japanese cars registered: 34
Total cars registered: 258
W. Germany:
Japanese cars registered: 437
Total cars registered: 2,904
Britain:
Japanese cars registered: 246
Total cars registered: 2,504
SOURCE: Industry figures, Integrated Automotive Resources, “Fast Track News”
