Nissan receives $12-million government subsidy to keep UK plant running

Even as Nissan shifts the manufacture of its next-generation subcompact car Micra to India from its Sutherland plant in the UK, the British government has announced a £6.2-million ($12 million) subsidy to the Japanese firm to manufacture a new model in the UK to keep the plant from closing down.

The new compact sports utility vehicle (SUV) will be built at its Sunderland plant from 2010. The new model will replace the Micra subcompact at the factory in northeast England. Production of the next-generation Micra will be shifted to a factory to be built in Chennai, with partner Renault SA. (View the Nissan Micra)

Nissan MicraThe grant will fund half the costs of switching to the new vehicle when the company stops production of the Micra, a Nissan official said. The subsidy to the plant was announced during Prime Minister Gordon Brown's visit to the Japanese firm's European Design Centre in London.

Nissan announced an overall £55 million investment plan for the Sunderland plant. which has 4,700 workers and made a record 374,000 vehicles last year.

In the last fiscal year that ended on 31 March, the Sunderland factory produced a record 374,076 Micras, Qashqai SUVs and Note hatchbacks, up 24 per cent from the previous year. The company said in January it would add 800 staff and begin a third production shift in Sunderland in response to brisk demand for the Qashqai model.

Nissan sells about 80 per cent of vehicles produced in Sunderland outside Britain, making it the country's biggest vehicle exporter. However, under a business plan announced last month, Nissan had said it would source and build its new entry-level subcompact cars such as the Micra in five low-cost countries including India and Thailand.

Brown said, ''I'm delighted to congratulate Nissan on this new model, which will bring to Sunderland something that's going to guarantee jobs in the distant future.''

''We are encouraged by the proactive support shown by the British government,'' Carlos Ghosn, chief executive of Nissan, responded. He is also CEO of Renault Motors.