Nissan may spurn Blair's offer

Tony Blair's attempt to save thousands of Nissan jobs in the North-east appeared doomed yesterday after the company said the high level of the pound had stacked the odds against its Washington plant.

Tony Blair's attempt to save thousands of Nissan jobs in the North-east appeared doomed yesterday after the company said the high level of the pound had stacked the odds against its Washington plant.

The Prime Minister offered the prospect of government aid worth up to £50m if the Japanese firm agreed to build the next generation of the Micra in the UK instead of France. The regional assistance grants, which would have to be cleared by the European Commission, could save more than 1,000 out of the 4,800 jobs at the plant near Sunderland.

But after a meeting between Mr Blair and the Nissan president, Carlos Ghosn, at Downing Street, the company said shifting production to France was the more attractive option.

Mr Ghosn told Mr Blair he had major concerns that the north-east plant could not compete with French and other European sites and called for a signal that the UK would join the euro. "Mr Ghosn warned about the effect on future investment of the relative strength of sterling against the euro," a Nissan statement said. "He stressed the importance of exchange rate stability in planning long-term investments."

Mr Ghosn also confirmed that Nissan was buying fewer components in the UK to cut costs and lessen the risk from currency changes. A spokes-man for Nissan said although its UK plant was among the most efficient in Europe, costs needed to be cut by 30 per cent to stay level with its French competitor. The north-east plant was also not profitable in its European car sales, which made up 75 per cent of the output of the factory, he said.

To cut costs, suppliers would have to make their components much cheaper, which inevitably meant making them outside Britain. "All things being equal, the UK plant would get the new Micra. But all things are not equal."

Nissan said it needed long-term guarantees because it would be pumping £200m in capital investment into its new Micra production. It hoped for sales of £500m a year over 12 years and the currency was crucial to its decision.

Industry estimates show that 300,000 jobs in supplier firms for manufacturers are at risk from the high level ofthe pound.