Honda (Investment)

– in the House of Commons at 4:37 pm on 13th July 1989.

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Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble 4:37 pm, 13th July 1989

With permission, Mr. Speaker, I would like to make a statement on a major Japanese inward investment project in the motor sector by Honda. Since shortly after its return to full private ownership last year, Rover has been discussing with Honda how best to strengthen each other's position in Europe. One element in those discussions has been Honda's site at Swindon, which has already been developed for engine manufacture. I am sure that the whole House will join me in welcoming today's announcement that Honda is to extend that facility to full manufacture of cars for the European market. The new plant will add some 1,300 jobs to Honda's existing work force at Swindon, as well as providing additional opportunities for Rover Group's own Swindon facility, from which it will source pressings. The project will involve additional investment of around £300 million, and no financial assistance has been requested.

The plant is scheduled to commence manufacture at the end of 1991, with a limited volume of Honda cars. That will be in direct substitution for imports from Japan. One year later, a full range of production operations will start, with output rising rapidly to 100,000 cars per annum in 1994; that will include cars built for Rover. Rover will continue to build cars for Honda at Longbridge. Honda has indicated its wish to achieve the maximum commercially feasible level of local content throughout the project and it is its firm intention to reach an 80 per cent. level within 18 months of the start of full commercial operations.

The companies have now decided to cement their partnership through significant minority cross-shareholdings between Honda's United Kingdom manufacturing company and Rover Group. They believe that that will have important commercial benefits for both companies. We see it as a vote of confidence by Honda in the United Kingdom and in the Rover Group, and a tribute to the efforts of Rover's management and work force in restructuring that company to meet the exacting standards of today's market place.

We are confident that today's announcement amounts to a further step in the renaissance of the United Kingdom motor industry, ensuring that it will play a significant role in the European market of the 1990s. I commend it to the House.

Photo of Mr John Garrett Mr John Garrett , Norwich South

Does the Minister agree that we would not have has this modest statement but for the bitter pill of the preceding one? The Department of Trade and Industry has contributed absolutely nothing to the deal.

Will he confirm that the cross-shareholding between Rover and Honda UK is 20 per cent? Why has the Minister not told the House that that is what it is? How could that be fair to Rover? What valuation would that place on Rover?

Is the Minister aware that we welcome Japanese inward investment so long as it is complementary to our indigenous manufacturing capacity and not destructive of it? In that regard, what are the implications of the agreement for Rover Group's employment at Longbridge and at Cowley and, in particular, for the collaborative ventures that the two companies have already entered into on the R8, R9 and Rover 8000 model? Will those ventures still go ahead, or will they be overtaken by today's announcement? What does the Minister expect the impact to be on the output and employment prospects of other car manufacturers in Britain?

When the Minister speaks of 80 per cent. local content, I assume that he means European Economic Community content. Could he tell us what the British percentage content will be? Will it include such key components as transmission and electronics? Will research, development and design be carried out at Swindon or back at the headquarters in Japan?

What sign is there that France, Italy and Spain will be willing to remove their obstacles to Japanese car imports from Britain without further undertakings? What is his response to their argument that the British motor manufacture industry is becoming a Japanese offshore island?

In view of the so-called renaissance of the British motor industry to which the Minister referred, when does he expect us to have a trade surplus in motor vehicles? For how much longer will there be a British-owned motor manufacturing industry?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

It really is extraordinary that, when I come to the House and make a statement that is wonderful good news for the motor industry and for Swindon in particular, all that the hon. Member for Norwich, South (Mr. Garrett) can do is make snide remarks about colonisation —[HON. MEMBERS: "Answer the questions."] I will come to the questions that the hon. Gentleman posed. It is right and proper, however, that my hon. Friends and I should record our disgust at the way in which this particular announcement of good news has been approached by the Opposition.

I remind the House, in case the Opposition are unaware of it, that this announcement represents the third major inward investment coup in the motor sector of the United Kingdom. It follows on from Nissan and Toyota—now we have Honda. That means that about £1·8 billion of investment in the United Kingdom has created about 8,250 jobs directly, and at least as many again in the supply industry. All that the hon. Member for Norwich, South can do is complain about that. He calls that "modest". I do not call it modest; I call it a substantial contribution to our economy and deservedly so.

The hon. Gentleman asked a number of questions, first about the 80 per cent. content. The 80 per cent. content will be British content obviously, as that is what we committed ourselves to in the past. We anticipate that that will be the case again. [Interruption.] Built within the EEC. That 80 per cent. is deemed to be British, built within the EEC. The hon. Gentleman knows full well that that was the case with Nissan—80 per cent. was made in Britain within the EEC. [Interruption.] It is quite straightforward. There is no question or argument about it.

The hon. Gentleman asked about cross-shareholding. The details of the agreement are not yet available, as they are commercially confidential, but we anticipate that the hon. Gentleman's figure will probably be about right. It will be a cross-shareholding—[interruption] The hon. Gentleman posed a question and I am seeking to answer it. He suggested that there was a cross-shareholding of 20 per cent. We do not know the final details yet, but that sort of figure will probably be the end result. I hope that the hon. Gentleman will accept that in the spirit that it is rendered. The terms of the agreement will obviously be confidential until such time as the companies concerned announce them. That is right and proper, since Rover Group is now in the private sector.

The hon. Gentleman asked about jobs at Longbridge. We understand from Rover Group that, as a result of the agreement, there is unlikely to be any effect upon jobs at Longbridge. The hon. Gentleman also asked about Cowley. He will be aware that, within the corporate plan of Rover Group, it has said that Cowley is one of those areas that is being looked at. Nothing changes as a result of the agreement that is being negotiated between Honda and Rover Group.

I believe that I have covered the questions asked by the hon. Gentleman. I hope that he will appreciate that my hon. Friends will take an entirely different view from his of this excellent news.

Photo of Mr Norman Tebbit Mr Norman Tebbit , Chingford

Will my hon. Friend agree that it was virtually inconceivable before 1979 that Great Britain would have been chosen by what is probably the world's leading motor manufacturing company as the site for its investment in the EEC? I might add that it also would have been inconceivable before we joined the EEC. Is my hon. Friend not as shocked as I am that the sole reaction from Opposition Members is to try to show that, in some way, it is discreditable that a foreign company should be investing large sums in British industry and bringing jobs to Britain? I find that deplorable. Does my hon. Friend share that feeling?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

My right hon. Friend, speaking with the authority of his former position within the Department of Trade and Industry, knows exactly how important this deal is in relation to the past, present and future of the motor industry. I suspect, as he has pointed out, that many people within the country, particularly in the area of Swindon where the constituency of my hon. Friend the Member for Swindon (Mr. Coombs) is so beneficially affected, will take note of the churlish attitude of the Opposition in the way in which they have responded to the excellent news.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Education)

The Minister called this good news, but is it good news for Cowley? Is it not disgraceful that his statement and the company handout at the Cowley plant this afternoon made no reference to Cowley? Does he not understand that Cowley workers will ask the same question as I do—what implications does the agreement hold for Cowley? What is its future in this? Why put the investment and plant 25 miles down the road at Swindon when there is a perfectly good plant at Cowley with an excellent record of productivity, quality and industrial relations?

Does the company not owe it to the workers at Cowley and the Government to spell out what the agreement means to those workers? Will the 100,000 vehicles be in addition to Rover production, in which case surely they will be competing with them, or is the reality that those vehicles will displace production from other centres, most notably Cowley? Unless I hear some contradictory statement from the Minister, the conclusion at Cowley will be that his doom-laden words spell its death sentence.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

The hon. Gentleman makes comments about Cowley as he is entitled to do as it falls within his constituency, but he will recognise that this agreement has been carried out between two independent companies about what they see is best for their future. It is something for them to decide. We have been party to the agreement of intent between Honda and the Rover Group. That is why we are involved. There is no link between what is proposed here and the future of Cowley south.

The hon. Gentleman is being mischievous. I do not think that he is serving his constituents' interests by taking the attitude that he does, but perhaps it is because his attitude towards cars is summed up by his question to my right hon. Friend the Secretary of State for Transport earlier this week, when he suggested that the relentless increase in car use was something to be deplored. I find that an astonishing remark to come from that hon. Gentleman.

Photo of Mr Simon Coombs Mr Simon Coombs , Swindon

Is my hon. Friend aware that Honda is already a valued member of the industrial community of Swindon and that today's news will be warmly welcomed in the town? Will he pay tribute to the current work force of Honda in Swindon and the work force of the Rover Group plant at Stratton in Swindon? It is clearly as a result of their efforts that the company has made the decision which my hon. Friend has announced this afternoon.

Will my hon. Friend make representations to his other hon. Friends in the Departments of Transport, Employment and Environment so that today's good news is not spoiled by difficulties of transport infrastructure—because clearly there will be major movements of goods in and out of the plant in the future—the provision of visas for foreign nationals whose jobs will bring them to Honda in the future and of the need to train the work force in a town with an unemployment rate of less than 3·5 per cent.? Will he speak to his hon. Friends at the Department of Environment, because we do not need planning holdups when we try to put this good news into practice? Can my hon. Friend confirm that 80 per cent. local content must, under the rules of the European Commission, be European local content—

Photo of Mr Simon Coombs Mr Simon Coombs , Swindon

—and will he make sure that as much as possible of that local sourcing will be United Kingdom-based?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

My hon. Friend, as always, speaks strongly for his constituents' interests, and he is right to draw attention to the fact that it is largely because of the work, commitment and enthusiasm of his constituents and those working within the Swindon operation that Honda has decided to expand in this area. I shall certainly pursue, as 1 know he will, the points he made about my hon. Friends in other Departments, who have interests in relation to Swindon's infrastructure.

As for local content, I shall clarify the position so that the House knows exactly what it is. I shall state it as categorically as I can. The 80 per cent. local content required by our agreement is within the EEC, but will be British-based. We shall encourage British component companies and Honda to utilise—

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

That is not what the hon. Gentleman said.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

That is exactly what I said.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

In which case, I apologise if there has been a misunderstanding. If it was on my part, as I made the comment, I shall withdraw it unreservedly. It is crucial to make clear that it is 80 per cent. EEC content and we shall endeavour to ensure that that 80 per cent. will be British. In view of what the hon. Member for Norwich, South (Mr. Garrett) said about the colonisation of the motor industry by Japan, it is worth putting on the record the fact that it is Honda's intention, as it has been that of many other companies investing in the motor industry in this country, that that content shall be as British as possible.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

The Opposition always welcome jobs in manufacturing, in view of the 2 million jobs which have gone since 1979 under the present Tory Government. Will there be a continuing and developing design and development input from the United Kingdom into this plant, or has the hon. Gentleman merely announced a screwdriver assembly job? I am pleased that the Minister has clarified the confusion and stated that the local content means EEC-wide, not United Kingdom-based.

Since the hon. Gentleman intends to help United Kingdom manufacturers, how will he help a firm such as Hepworth and Grandage, the biggest piston manufacturer in the United Kingdom, to ensure that it has an opportunity to supply pistons to this new assembly plant and maintain and improve its excellent production capacity? Are the Japanese able to invest heavily in design and development and so be extremely successful in industrial manufacturing because they put their investment into goods and services which people want, instead of investing, as this country does, in nuclear weapons and defence expenditure?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

The hon. Gentleman, as usual, has covered a wide variety of questions in his remarks. Research and development is a matter for the companies to decide. They have indicated that they will manufacture cars in Britain which will be exported abroad or used within the domestic market. We have no indications, and would not expect any, to suggest that the company concerned, along with the other two major manufacturers from Japan which invest in this country—Toyota and Nissan—will do the same. The decisions must be made by the companies, which we anticipate will be as successful now as in the past.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

Does my hon. Friend agree that this project should be warmly welcomed for the contribution it will make to our balance of payments deficit, running at £6 billion per annum; that, with this investment, we can once again look forward to budding 2 million cars a year in this country; and that the cross-shareholdings represent an outside investment in the Rover Group which is a tribute to what that company has achieved and an assurance that Rover will continue to make cars for Honda? What better endorsement could we wish for?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

My hon. Friend, with his considerable authority as chairman of the all-party committee, sums up the matter succinctly. I can do no better than add my support to that.

Photo of Mr John Hughes Mr John Hughes , Coventry North East

How can the Minister fail to understand the mistrust of the House when it is aware that deals have been done—in fact, cooked—to get over the cash flow problems of British Aerospace? Will this deal allow Honda to exploit the research and design centre at Coventry? Will it pose a threat to jobs at Coventry, as it has to other companies such as Royal Enfield, which lost 1,200 jobs from a similar deal?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

I think that the hon. Gentleman is missing the point. This is an investment for the motor industry; as he has heard from my statement, the matter is one between Honda and the Rover Group, and does not involve anyone else other than, to a limited extent, British Aerospace, which owns Rover Group. As the hon. Gentleman should be aware, this matter relates specifically to the motor industry.

Photo of Mr Robert Hayward Mr Robert Hayward , Kingswood

Does not my hon. Friend agree that the greater threat to Cowley south stems, as he indicated, from a quote in column 673 of last Monday's Hansard, in which the hon. Member for Oxford, East (Mr. Smith) said: Does he accept that the way to tackle the"—[Official Report, 10 July 1989; Vol. 156, c. 673]—

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Education)

On a point of order, Mr. Speaker. This does not relate to the statement.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I hope that we can stick to the subject of the statement, not go on to other issues.

Photo of Mr Robert Hayward Mr Robert Hayward , Kingswood

Is there any threat to any other part of the Rover plant, including Oxford and Longbridge, as a result of my hon. Friend's statement?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

Largely, these matters are for those at the Rover Group and Honda. Broadly speaking, we do not anticipate that there will be any deleterious effects on those parts of the Rover Group, as presently constituted.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

Does the Minister's phrase "local content" include transmission and electronics?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

"Local content" refers to any aspect of components which go into a motor vehicle.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Can my hon. Friend confirm that, between 1974 and 1979, the proportion of motor cars imported into the United Kingdom doubled, since when the proportion has remained static, and that, with the announcement of these three major investments by the Japanese, there is now every prospect of reducing that proportion? Is not today's announcement the best possible news for UK Ltd.?