French motor car manufacturer Renault – itself in the news for the closure of its Belgian plant at Vilvoorde – now finds itself in the unusual position of having to warn its government not to hand out subsidies to a Japanese competitor.
Toyota has chosen France to locate a second car assembly plant in Europe in a bid to help tighten its grip on one of its weakest markets.
Toyota plans to invest about yen200bn (£1bn) in the plant, which will assemble 100,000 new compact cars a year designed specifically for Europe. Production is expected eventually to reach 200,000 cars a year.
A company spokesman said neither the site nor the amount of investment had been finalised for the new plant, although he said the new small car would have a 1,000cc or 1,300cc engine.
While assembling cars in France, Toyota also plans to expand capacity at its British engine plant and build new components plants in East European countries including Poland.
By boosting engine production in Britain, Toyota hopes to avoid reviving the furore sparked when company president Hiroshi Okuda hinted in January that Toyota might not invest in Britain if the pound is not part of the single European currency.
The strategic positioning in France will allow the car maker to spread its influence around the Continent by way of parts imports.
Toyota is likely to use injectors from a Hungarian unit of Denso, the Japanese manufacturer that plans to build its first European injection pump factory in Hungary with start-up by June 1999.
With the European Union about to remove the last of its car trade barriers, Toyota will be well positioned to expand its share in a market it has been eyeing for some time.
But the company will be paying higher labour costs. Toyota’s choice of northern France may spark off heated discussions with French car makers, which are already charging that Japan has been exporting too many cars to Europe.
Louis Schweitzer, chief executive of Renault and chairman of the European carmakers’ association, Acea, said in Frankfurt last week that Japan had not observed a 1991 accord designed to limit its car exports to Europe.
He estimated that the Japanese had sold three million cars too many in Europe because they had not restricted sales to take into account the European market’s weakness since 1992.
Schweitzer said Acea was concerned about whether Toyota would receive government subsidies for its new plant.
‘If Toyota wants to come to France, they’re welcome,’ he said. ‘But I would fight to see that they do not get subsidies.’