Japan's biggest carmaker, Toyota, has jumped into Britain's heated debate about a single European currency and has been forced to jump out again in the face of hostile reactions.
Toyota President Hiroshi Okuda began the furor Wednesday by issuing a warning that the company would have to change its investment strategy in Europe if Britain decided to stay out of European Monetary Union (EMU).
Toyota Motor Corp. is one of the largest foreign investors in the United Kingdom. British government ministers quickly concluded that Mr. Okuda's remarks were a clear threat that such investment would dry up unless Britain joined the single currency.
Investment featured on the campaign trail
At present, as the country heads toward a general election, the government is putting heavy stress on its success in attracting investment by Japanese companies such as Toyota, Nissan, Honda, and Sony.
Deputy Prime Minister Michael Heseltine said Okuda had "grossly overstated" his company's position. He insisted that the government was right to hesitate before committing itself to a single currency.
Meanwhile, a dispute erupted between Conservative Euroskeptics, who accused the Toyota chief of open interference in British politics, and politicians strongly in favor of Japanese investment.
Yesterday, with the dispute showing no sign of abating, and the government clearly upset, Okuda issued a clarifying statement: "The Toyota Motor Corp. position regarding necessary future investment in Europe is now under study and nothing has been decided."
But Okuda stuck to his view that a single European currency "would be a factor in deciding" its future investment strategy in Europe. A day earlier, speaking to reporters in Tokyo, Okuda had said Toyota's investment policy toward Britain "will change" if the country stays out of a single currency. No investments would be canceled, he said, but the company would look "elsewhere in Europe" to build its cars. It might be "excessive" for Toyota to invest any more in Britain. Spain, Ireland, and former communist bloc countries such as Poland and Hungary have been trying to attract investment by Japanese carmakers.
Last year, Toyota announced its intention to invest an additional 200 million ($320 million) at its 700 million plant at Burnaston, Derbyshire, in central England. It also plans to build a new-model Corolla in Britain. Toyota is reported to be planning to build another factory, but has yet to decide whether it should be in Britain or in Eastern Europe.
A single currency would mean simplicity
About three-quarters of Toyota cars built in Britain are exported to continental countries. In his Wednesday comments, Okuda argued that heavy volume exports from Britain to the rest of the European Union (EU) would make it necessary for his company to trade in the euro (the planned single currency) rather than in a mixture of currencies, including the pound sterling.
In the wake of the Toyota chief's comments, Nissan Motor Company, the first Japanese carmaker to build a British plant, agreed that it would prefer Britain to join EMU, but said this was not "a major concern."
British political arguments aside, there is fairly general agreement that a single currency would make it easier for companies such as Toyota to trade in Europe. Edwina Currie, a Conservative member of Parliament, claims that by staying out of a single currency Britain would be actively dissuading investment not only from Japan but also from other "tiger" economies such as South Korea and Taiwan.
In Brussels, top EU officials strongly favor a single currency. Britain's Neil Kinnock, the EU's transport commissioner, said Wednesday: "Toyota, like a lot of other major companies, faces the reality that life outside the single currency could be difficult and complicated."