Toyota looks at French factory

Toyota yesterday confirmed it was studying the possibility of building a pounds 1bn car plant in northern France but industry analysts were divided over whether it was the best location for the Japanese car maker to expand.

Responding to reports that the plant may be built on the outskirts of Lens, a French town close to the Belgian border, a Toyota spokesman in Tokyo said: "France is a possibility, but so is Germany or the UK. We are still studying the possibilities and nothing has been decided."

If the factory to produce 200,000 small Micra-class cars does go to France, it will be a bitter blow to Toyota's Burnaston plant in Derbyshire. Output from Burnaston is due to rise to 200,000 next year when it begins production of a second Corolla-type model, lifting the workforce from 2,300 to 3,000.

Reports that the plant may go to France follow comments earlier this year by the president of Toyota, Hiroshi Okuda, that it would have to review its European investment strategy if Britain stayed outside a single currency. However, analysts said yesterday that Toyota could as easily site the plant in Belgium or central Europe while other industry watchers believed the UK had not been ruled out, pointing to France's high labour costs and traditional hostility to Japanese carmakers.

Christopher Redl, an analyst at ING Barings in Tokyo, said France seemed the favoured location: "I heard about this last week. At the time I could hardly believe it. But my understanding is that this comes from the top."

However, Koji Endo, a senior vice president of Lehman Brothers Japan, said: "Logically, the possibility of a Toyota plant in France is very weak. Eastern Europe is better in view of low production costs, parts sourcing and a potentially sharp growth in the car market there."

Garel Rhys, professor of motor industry economics at Cardiff University, said: "The question for Toyota is whether they want to put all their eggs in one basket as Nissan has done. France is interesting but so is Belgium and central Europe and although a second plant at Burnaston is not the racing certainty it was there is still everything to be played for."

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