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Vince Cable says decision – which will boost area hit by cuts and recession – 'a vote of confidence in UK manufacturing'
Nissan will build its new compact car at its factory in Sunderland, creating 2,000 jobs and providing a major boost to one of the regions hardest hit by recession and spending cuts, the company says.
The business secretary, Vince Cable, will confirm at the Geneva Motor Show that the Nissan expansion – which will create 400 jobs at the factory and 1,600 more in the supply chain – was underwritten by £9m from the government's regional growth fund.
He will say: "The decision [from Nissan] is another clear vote of confidence in Britain's manufacturing industry, and vindicates the government's decision to put support for manufacturing at the core of its economic strategy."
The move comes as 2,800 workers at the Vauxhall plant in Ellesmere Port, in the Wirral, await the outcome of a review of General Motors' European operations that could lead to the closure of the factory.
Cable flew to New York last week to persuade executives at GM, which owns Vauxhall, to keep open the plant, which is one of the region's biggest employers. But the business secretary told the BBC on Monday he had concerns about the factory's future. "We have set out a very positive case to them for remaining and indeed expanding their operations in the UK," he said. "I'm positive, but it is their decision and they haven't yet made it."
GM is considering closing at least two factories in Europe, with Ellesmere Port and Bochum, in Germany, understood to be facing the most serious threat. GM is expected to make a decision on Ellesmere Port at the end of the month.
However, Cable hailed improved relations between trade unions and management, as well as co-operation between universities and companies, for enabling the "transformation" of an industry that was in the doldrums in the early 1980s. Nissan's Sunderland venture, founded in 1986, is widely viewed as a turning point for the UK industry.
"A generation ago, the [UK] automotive sector appeared to be in irreversible decline, beset by strikes and poor management, but today it is a sector transformed," he said. The unnamed compact car will be unveiled in Geneva on Tuesday.
Nissan's head of European manufacturing, Trevor Mann, said the move would maintain Sunderland's position as the UK's largest car factory. "I'm delighted that Sunderland has secured what will be another very important model for Nissan in Europe," he said.
"It is a testament to the workforce, the ongoing support from the UK government, and all of our regional partners and suppliers."
Tommy Brennan, regional official of the GMB union, said: "This is really good news for the north-east and all the suppliers to Nissan where GMB members work. It is a ray of sunshine."
The number of people employed at the factory, which has benefited from rising demand for cars from emerging economies such as Russia and China, will rise to a new record of more than 6,000.
Last year, the plant hit a production record when 480,000 vehicles rolled out of the facility, where the Qashqai, Juke and Note brands are made.
The Nissan announcement will be welcome news in the north-east, which has been hit hard in the past three years by job losses not just in traditional industries such as steelmaking, but also in the service and public sectors.
Other British car manufacturers are also hiring more workers. Jaguar Land Rover (JLR) is creating a further 1,750 jobs, and Toyota has announced plans for 1,500 new jobs at its plant in Burnaston, Derby.
JLR, Britain's biggest car industry employer, has said that while it is considering plans to begin manufacturing in China, it will also be creating more jobs in the UK as it responds to increasing demand. Itand will increase production at its plant at Halewood, on Merseyside, where the Range Rover Evoque is made.
JLR is said to be close to a £1.75bn partnership with the Chinese carmaker Chery.
Ralf Speth, JLR's chief executive, who is in Geneva to promote a new soft-top model of the Evoque and a new Jaguar, tried to allay fears that expansion in Asia would cost British jobs.
He said: "We are expanding like never before, but this is not instead of building in the UK: it is in addition to."
Speaking in Geneva, the head of Toyota's European operations, Didier Leroy, played down the impact of a manufacturing glut on the Japanese carmaker. The threat to Ellesmere Port is symptomatic of a capacity problem hitting most manufacturers on the continent, but Leroy said Toyota had no plans to cut back at any of its nine plants, including Burnaston and Deeside, where a total of 3,000 people are employed. "We don't have any need to make any reform of capacity in Europe. We have absolutely no overcapacity at the European level," said Leroy, adding that Toyota had already started to overhaul its European operations two years ago.
However, Leroy warned that a slump will hit the industry this year, with pan-European sales expected to fall 5%. "In 2012 we know that the market is very difficult. At the start of the year the western part of Europe is even worse than was planned a few months ago," said Leroy. Analysts say the decline in sales is leaving mass-volume car makers with too much capacity, amid industry estimates that the major plants are only 80% utilised. Nonetheless, Toyota expects to sell 835,000 cars in Europe this year, including Russia and Turkey, up from 822,000 in 2011.