Tomorrow around 20 leaders of the UK motor industry will attend a summit at 10 Downing Street on the prospects for a strategically important but, in some eyes, over-valued segment of British manufacturing. The mood will be palpably different from a year ago when, in the words of Sir Ken Jackson, the AEEU engineering union leader, everyone saw the industry in potentially terminal decline.

Ford and General Motors, the world's biggest car makers, decided belatedly to confront huge overcapacity in their European operations and close car-production at two big UK plants, Dagenham and Luton, with the loss of some 4,000 jobs.

Rover which, as BL, had once provided around half the UK market and now had 5%, had been dumped by BMW and had been bought for the nominal sum of £10 amid grave doubts about its survivability in the short run, let alone over the longer term.

Nissan, owners of Europe's most productive plant, at Sunderland, and, in turn, 36.8% owned by Renault, was threatening to take production of its new Micra small car to Flins, north-west of Paris, where costs, not least because of the weak euro, are 30% lower.

State of the art plant

Nissan, headed by le cost-killer Carlos Ghosn, stayed in the UK, of course, not least because of a £40m government grant while cash-rich Rover began confounding its critics. And, equally, the doom and gloom merchants were having far too easy a ride; it was never that bad.

Prof Garel Rhys, director of the centre for automotive industry research at Cardiff, dismisses chat about "meltdown" or "general British malaise". He insists, rightly, that the problems were "firm-specific" and caused by individual management failures now being addressed.

Even so, the mood has changed. Take Halewood, once regarded as an epicentre of Britain's industrial relations disease, home of poorly-produced Ford Escorts that seemed to be outnumbered by strikers' braziers at the gates - and under a semi-permanent threat of closure.

In late May, after a £300m makeover, a million days retraining its 3000-strong workforce and yet another state grant (£43m), it reopened as a state-of-the-art plant producing the new baby Jaguar, the X-Type, and a model of the partnership approach to manufacturing.

Surveying his new domain, Wolfgang Reitzle, Jaguar chairman and head of Ford's premier automotive group, spoke suavely of "one of the greatest turnarounds in British industrial history." Ford's supremo, Jac Nasser, went one better via satellite link: "The greatest turnaround in British industrial history and even in Ford Motor Company terms."

Reitzle, who now runs Volvo, Land Rover and Aston Martin as well as Jaguar, said: "There is no reason why the most luxurious cars in the world have to be built in Germany any more." High praise indeed from an ex-BMW development director - who happens to treat Jags as German cars assembled in the UK.

'Dark, satanic mills'

Take Cowley or BMW Oxford as it's now known. It is in the throes of its own makeover from what one manager called "the dark, satanic mills" whose roofs leaked rain, into a plant on a par with its German parent's Bavarian plants - the yardstick for the entire European auto industry. On Saturday, the first of its output, the new Mini, goes on sale in UK showrooms.

The speed taken to ensure the Mini's launch has meant that the old Cowley plant remains a building site - and that staff working the new production line, complete with wooden floors to ensure ergonomic comfort, are finding it tough to reach BMW's stringent quality standards. The parent is even shuttling in 100 key personnel every week from Regensburg, home of the 3-series, to fill the gaps.

But Herbert Diess, the plant's managing director, is confident that this year's output will be 30,000, rising to 100,000 next year - and it'll be profitable. Staff are being trained in the NOW (New Oxford Way) programme - a radical dose of cultural change to make them as disciplined, flexible and productive as Bavarians.

Take Longbridge, once renowned for poor industrial relations sans pareil and now, via BMW's generous dowry to its new owners (£500m repayable over 50 years, since boosted by £90m), a re-energised production centre employing 5,500.

Next week John Towers, chairman, and Kevin Howe, chief executive, of MG Rover are expected to tell those employees (and shareholders) that the private consortium running it has pared losses running at £840m under BMW to less than £300m, on an annualised basis, last year.

This year losses should be reduced to about £100m, with breakeven in 2002-2003 and profits by 2004. Perhaps sooner, as Rover is still generating cash al though its UK market share has fallen to little over 2% compared with a target of 4%-5%.

Dithering over the euro

This year the firm will probably sell 185,000 cars, raising this to 200,000 in 2002. Howe, who says he is only producing cars he can sell, normally to customer specification, is confident the turnround will be such the company can begin designing and developing its new medium-sized saloon - replacing the Rover 25 and 45 - out of its own cash resources.

The Japanese implants - Honda, Nissan and Toyota - are experiencing what Prof Rhys sees as a crisis of confidence. "They could rely for years on their guaranteed quality and reliability and engi neering skills but none of the cars they have recently produced is one you would fight to get."

According to consultants AT Kearney, Nissan should be producing 420,000 by 2004 compared with 328,000 last year, Honda 195,000 (74,005) and Toytota 220,000 (170,000). There's always the supposed danger that more government dithering over the euro and a continuingly disadvantageous exchange rate will make them all have second thoughts. Prof Rhys says they may be hiding behind the exchange rate problem to mask "basic corporate and entrepreneurial problems".

The summit will take place in upbeat mood about the British industry's prospects. But is it British any longer? Global car manufacturers are increasingly sourcing their parts and components from overseas to offset the strong pound; the new Mini engines come from Brazil, for instance, and its overall UK content is barely 40%. Just under half the new Vauxhall Vectra to be built at Ellesmere Port will be British. The Japanese are cutting their UK content from 70% to 30%-35%; Peugeot's is barely half. BMW's new Rolls-Royce will be almost entirely non-British.

The UK auto industry may flourish in future but it will hardly deserve its national status.

In a niche

In 1993 we made 82,598 niche or premium cars which accounted for 6% of all UK car production.

1994: 106,745 niche cars, accounting for 7.3% of all UK car production.

1995: 144,981 niche cars, accounting for 9.5% of all UK car production.

1996: 140,476 niche cars, accounting for 8.3% of all UK car production.

1997: 143,599 niche cars, accounting for 8.5% of all UK car production.

1998: 194,722 niche cars, accounting for 11.1% of all UK car production.

1999: 235,649 niche cars, accounting for 13.2% of all UK car production.

Making it

Expected UK car production

2000: 1,635,600

2001: 1,680,900

2002: 1,767,000

2003: 1,780,700

2004: 1,866,900