Toyota, the Japanese car-maker, yesterday took a risky bet on the UK entering the euro in the near future by confirming plans to raise output at its Burnaston plant in Derbyshire by 30%.
The company is betting that the pound will, at the very least, enjoy a more competitive rate against the euro in the short term by increasing production at Burnaston from 170,000 units a year to 220,000 and taking on 300 more staff by 2002.
Its main UK plant is the second most productive in Europe, with an annual output of 78 cars per employee, but its British operations lost £50m in 1999 and are still in the red because 80% of its output goes to mainland Europe.
Toyota's plans stirred up the arguments over the merits of UK entry to the European single currency, with pro-euro union leaders arguing that they spelled a hedged bet on joining and Business for Sterling, the main anti-euro campaign, insisting that they simply testified to Britain's continuing attractiveness for inward investment.
Bryan Jackson, a senior Toyota UK director, said the "survival plan" entailed switching production of three-door Corolla from Japan to Derbyshire where the five-door version has been built since 1998. The company, which em ploys 3,000 in the UK, will take on an extra 250 staff at Burnaston and 50 at its engine plant on Deeside, north Wales.
The aim is to help counteract the "extreme market conditions" affecting the entire UK car industry where US giants such as Ford and General Motors (Vauxhall) are drastically scaling back production via plant closures, and other Japanese groups have or are planning to switch output overseas because of currency uncertainties. Dr Jackson said that Toyota hoped to improve cost efficiencies by spreading its fixed overhead costs but there was no guarantee that the plans would help overcome the company's financial difficulties. "It's very difficult to be profitable with the pound at its current rate against the euro," he said.
John Monks, TUC general secretary, pointing to greater convergence between the UK and continental economies, said: "Toyota is clearly banking on the fact that, while these changes are taking place in Derby, there will be a change in the exchange rate relationship with Europe and that Britain will either be at a more competitive exchange rate or, more desirably, be in the euro area."
Sir Ken Jackson, the AEEU leader, said: "Toyota is taking a clear decision to deal with exchange rate risk in a more positive way. We are pleased they are, unlike others, increasing rather than cutting capacity and this is an example others should follow."
• Peugeot, the French group, aims to sell 3m cars this year after announcing record sales of 2.82m in 2000, fuelled by demand for its 206 small car, which is built in Coventry, and the Citroen Xsara Picasso and for diesel-powered cars.
