Toyota decision comes as a shock to the UK

The automobile industry was the subject of controversy in December 1997, when it was announced that Toyota is to build a new assembly plant in France rather than in the UK. The decision was taken despite the facts that the labour costs are said to be higher in France, and the French Government has plans to reduce the statutory working week.

Toyota, the Japan-based motor manufacturer, has a UK plant at Burnaston in Derbyshire, which is said to have the third-highest productivity levels of any car plant in Europe. It was widely expected that the company would continue its investment in the UK by building a new plant aimed at production for the small-car market in that country. However, on 10 December 1997, the announcement was made that the GBP 400 million assembly plant, which is likely to create over 2,000 jobs, will be built in Valenciennes, northern France.

Both trade unions and opposition parties in the UK blamed the decision on the Government's delay in joining the single European currency; Toyota had announced earlier in the year that it would consider it a matter of concern if the UK stayed out of EU Economic and Monetary Union (EMU). Margaret Beckett, President of the Board of Trade, stated that the Toyota decision was nothing to do with the UK's position over EMU and insisted that rather it reflected the company's wider European business strategy. The company also denied that the decision was related to EMU.

Blame was also aimed at the French Government from some quarters, arguing that because French labour costs were much higher than those in the UK, the French Government must have offered some rather large inducements to the company. Even taking into account the strength of the GBP, French labour costs are argued to be around 10% higher than in the UK and this is set to rise when France reduces its statutory working week from 39 to 35 hours from the year 2000 (FR9710169F). The French Government adamantly denies such claims, stating that grants from the state are limited.

Although the indirect incentives to the company may be much larger than those directly provided by the French state, industry analysts believe that the decision is due to other reasons: Toyota having recruitment problems in the UK due to low unemployment and skill shortages; and the desire to emulate other big produces such as Ford and Volkswagen in having assembly in a number of different European countries.

UK employees and unions remain dissatisfied with these explanations. However, there was some consolation in that the UK is still likely to enjoy some spin-offs in the shape of some new production of parts in the UK, and the engines for the French-assembled cars being provided from the company's plant at Deeside, Wales.

For a French perspective on this issue, see FR9712187N.

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