Blog: Dave LeggettStraight talking from Honda (Tokyo and Swindon)

Dave Leggett | 24 May 2007

I see Honda's boss, Mr Fukui, has been sounding off about exchange rates and the UK's position outside of the euro. We've heard this before. The high value of sterling must be hurting Honda on its shipments to the European mainland, but the complaining (Toyota sometimes joins in) only seems to happen when the exchange rate is unfavourable.

It's swings and roundabouts on the exchange rate to some extent. Imports will be cheaper - vehicles and parts. And Honda sells almost 40% of its European sales in the UK - a percentage that is much higher than either Toyota (15%) or Nissan (23%).

Let's assume though, that sterling's appreciation has caused a significantly adverse movement on Honda's margin on continental European sales sourced from its UK manufacturing base. Fukui is probably not all that happy about that. But businesses that invest in a country do so on the basis of a whole host of factors. Exchange rate factors are a part of the mix. There are lots of positives and negatives associated with different locations. You assess them all and make your decision. It doesn't look good to periodically complain about one of those factors. That's tough, laddie.

Perhaps something has come out with the wrong emphasis in translation, but Fukui would be well advised to steer clear of the euro issue.

Aside from the simple point that it is a political decision for the British people to make, the euro question strikes me as a dead duck. It may have claimed plenty of newspaper column inches in the past (in part due to protracted agonising over Europe in the Conservative Party), but nowadays people don't care much about joining the euro. The latest developments in Coronation Street or the void created without Neighbours on the Beeb command far greater interest. The British economy is performing quite acceptably as far as most people are concerned. 

Neither of the main political parties here appears keen to raise the euro issue - there's not exactly a popular clamour to join. And no politician wants to risk being on the wrong side of a populist campaign to retain the pound. I can almost see the old currant bun's (The Sun 'newspaper') 'Save the Pound' campaign now. I expect they have it ready to go and the mere thought of it causes Gordon Brown to come out in a cold sweat.

In that context, Fukui's reported remarks aren't very politically astute. Is Honda playing a game concerning where it invests next, looking for some favourable treatment of some sort? Well, according to Honda UK's PR man, that's not exactly an issue for the UK either. He has told just-auto that the Swindon site is approaching capacity and there's no room for expansion. 

I thought we'd get a straight 'no comment'. It's certainly not every day that a PR man, in putting the record straight, effectively contradicts remarks attributed to his ultimate boss. Well done, that man! (I can think of some who would certainly have ducked it.)

Anyway, if Honda is thinking of investing in more European production capacity (perhaps a plant making the Jazz/Fit?) I can't really see why it would not be part of the OEM stampede into central/eastern Europe. And it can certainly look to toy with the candidates there in order to extract a good deal.

JAPAN/UK [updated 12:20BST: Honda president's euro comments "perplex" UK exec


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