IN THE recent industrial history of the North-East, success stories have been few and far between. The last two decades have seen a more or less unremitting decline in the former core industries of the region. Coal, chemicals, heavy engineering, shipbuilding and steel, along with more recent arrivals such as clothing, have all dramatically contracted, some to the point of extinction.

Heralded new saviours - notably the integrated circuit factories of Fujitsu and Siemens - seemed to close virtually as they opened in the 1990s, a sharp reminder that fears about a fragile branch plant economy remained valid. Yet amidst all this, since it began operations in 1986, Nissan has stood out as a beacon of hope in a sea of industrial decline and devastation - a real success story.

Within 15 years Nissan grew to provide around 5,000 well-paid jobs in Europe's most efficient car plant, with strong connections to the regional economy as it helped attract supplier companies and developed a fair part of its supply chain within the region, in turn leading to further job creation.

Nissan seemed to be a rare and classic case of a new sort of investment by global corporations, an embedded branch plant at the heart of a powerful auto cluster, in a new regional manufacturing economy. It seemed to be an exemplary case to try to emulate.

But, suddenly and with seemingly little warning, the plant is now under serious threat as Nissan considers moving production of the new version of the Micra to the Renault plant at Flins in France. This would deprive the Sunderland plant of a new third model and leave it confined to producing the Almera and Primera.

This would lead both to short-term job losses on a scale (estimated at around 1,300, plus knock-on effects to supplier and other service sector companies) that the North-East can ill afford. Even more worryingly, it raises serious questions about the longer-term viability of the plant and of the supply chain built up around it as capacity would be reduced by 220,000 units a year.

Is Nissan then, after all, simply just another old-style global outpost, a branch plant vulnerable to decisions taken elsewhere with scant regard for the consequences for regional development strategies? If so, what has produced this remarkable and rapid change in the fortunes and prospects of the plant?

One part of the answer is continuing concerns over exchange rates. For some time, Nissan has been warning of the effects of the appreciation of sterling on exports. With the emergence of the single euro currency, and its subsequent depreciation against sterling, these pressures intensified.

This is part of the answer to explaining the paradox of Nissan's Sunderland plant being the most efficient in Europe yet losing money. The exchange rate between sterling and the euro is crucial as the Sunderland plant is heavily reliant upon the EU market while Nissan sources quite a lot of its components from the UK.

The original rationale for locating at Sunderland was that it would provide a base from which to penetrate the EU market and circumvent the limits on imports from Japan to the EU.

However, as the UK is outside Euroland, and the exchange rate is unfavourable, this part of the original rationale has been seriously weakened.

Serious though the euro issue is, it would have assumed less importance had it not been for a major change in corporate anatomy, brought about by the forging of a strategic alliance between Nissan and Renault in 1999.

Renault took a 36.8 per cent stake in Nissan, which at the time was heavily loss-making, especially as a result of its operations in Japan in which capacity was barely above 50 per cent. This kept Nissan from bankruptcy but gave Renault the whip hand in the new set up.

Up then, Sunderland had been Nissan's flagship plant in the EU, although it had another significant factory near Barcelona. However, with Renault becoming the decisive partner in the newly-merged company, the terrain changed dramatically.

From the outset, Carlos Ghosn, formerly chief operating officer at Renault who took the same role at Nissan before becoming president in July 2000, signalled his determination to cut Nissan's losses and restore profitability by the end of the financial year 2000. He announced plans to shed 21,000 jobs and close five factories in Japan, to halve the number of suppliers and dismantle the Nissan keiretsu, the web of linked component supplies in Japan. It served notice of Ghosn's intent to embark on radical corporate surgery.

It should have set alarm bells ringing elsewhere, especially as the link between the two companies re-defined the possible choices open to Nissan in terms of its European production strategy.

Renault offers new opportunities for production within Euroland, while switching Nissan production to France offers a potential lifeline to endangered Renault plants in France. There are clear political attractions for Renault in being seen to save existing jobs and/or create new ones in France.

If this means switching production of the new Micra from Sunderland, with a consequent loss of jobs there, so be it. This is a price Renault is prepared to pay.

The Sunderland plant is caught up in a complex and paradoxical situation, with the fate of the plant beyond the control of those who work there.

Despite being the most efficient car plant in Europe, it is unprofitable. In part at least, this reflects the fact that the UK is outside Euroland and the current level of the sterling-euro exchange rate, a situation exacerbated by the reliance of Nissan on components made in the UK.

With the formation of the strategic alliance between Nissan and Renault, Sunderland shifted from being a jewel in the crown of Nissan's European production strategy to a potentially vulnerable global outpost.

The new alliance gave Nissan other production possibilities within Euroland (less loss-making if not necessarily profitable) and gave Renault a potential route to avoid the political opprobrium of cutting employment in France by switching production there.

It remains an open question whether the European Commission will allow £40m in aid from the UK Government in an attempt to persuade Nissan to produce the new Micra at Sunderland. It remains an even more open one whether such aid would produce the desired effect. In part, this is because it has been estimated that it would cost £79m more to produce the new Micra at Sunderland than at Flins.

More fundamentally, doubts about the future of the Sunderland plant remain because of the new and changed environment in which the plant, and the people who work there, find themselves.