Nissan set to cut a third of its British workforce

1,200 Sunderland workers laid off as demand slumps

Nissan is cutting 1,200 jobs at its Sunderland factory, slashing its British manufacturing workforce by almost a third as recession devastates Europe's demand for cars. Some 800 permanent positions will go and 400 temporary contracts will not be renewed, Nissan said yesterday, taking the Japanese company's 3,800-strong factory staff down to 2,600.

Some 80 per cent of the five different models of car produced in Sunderland are exported, the majority to Europe. But industry-wide EU car sales are now less than three-quarters of what they were 12 months ago, with no sign of an imminent recovery.

Trevor Mann, a senior vice-president of the group, said: "Like all manufacturers, the Sunderland plant is currently operating in extraordinary circumstances not of our making. It is essential we take the right action now to ensure we are in a strong and viable position once business conditions return to normal. Unavoidably, this means we have had to make some very tough decisions... however by doing so, we are helping to safeguard our long-term future."

An eight-strong group led by One North East, the regional development agency, and including Nissan and the North East Chamber of Commerce, has been formed to help Nissan staff affected by the redundancy programme and will meet for the first time this morning.

The decline has been precipitous. Until the end of September, Nissan was still on target for a record year of production. But demand has plummeted alongside economic confidence, and the credit crunch is making it more difficult for what buyers there are to raise money. Nissan now expects the Sunderland factory to produce 70,000 fewer vehicles in the financial year to March than last year's 370,000 total.

Nissan is not alone. Jaguar Land Rover has laid off 1,450 people in the UK since the autumn, and all of Britain's major car manufacturers have instituted unusually long periods of downtime over Christmas. The latest figures from the Society of Motor Manufacturers and Traders (SMMT), published this week, showed total British car sales in December down 21 per cent from 2007, with sales to private customers down by 24 per cent. Car production was down by a third last November as suppliers attempted to rein in production to meet falling demand, and commercial vehicle output was down by more than 50 per cent.

The situation is so dire that the industry is asking the Business Secretary, Lord Mandelson, to provide government assistance such as credit guarantees and special liquidity arrangements. The talks started last November, and although neither Nissan nor the SMMT say quicker action could have saved the 1,200 Sunderland jobs, time is running out as all major manufacturers and smaller companies throughout the £51bn-a-year sector face bleak forecasts for 2009.

Although ministers and officials understand the problem, the machinery of government is taking too long, according to Paul Everitt, the SMMT's chief executive. "As we go into the deepest, darkest period of this recession, getting credit flowing and so on will minimise the damage," he said. "This would always be a difficult situation, and there are always redundancies in a recession, but the key issue is to maintain and sustain the valuable industrial capability that we have. The sooner we get a clear indication of the level of support and the mechanisms by which it will be delivered, the more likely we are to preserve more of that capacity."

The problems are not restricted to Britain. In Japan, Toyota, Honda, Mazda and Nissan have all cut production and staff. The three US behemoths – Ford, General Motors and Chrysler – are relying on multibillion-dollar government hand-outs to stay afloat.