The wheels come off Maggie's revolution

There was no-one working at Europe's most efficient and highest-productivity car plant yesterday. By bleak coincidence it was a "shut-down day" at the Nissan factory in Washington Road, Sunderland. Such days are part of the normal production cycle but this one felt like a grim augury.

The sun fell a dull orange, like a ball of cooling molten metal, as it dipped below the rows and rows of unsold cars which formed the horizon outside the low blue and grey warehouse-like modern buildings. The red of the giant Nissan sign bled into the cold grey of the dying light.

It ought not to have been like this. The Sunderland plant is the most productive car factory in Europe. It is Britain's single biggest car producer, turning out one in five UK-made motors. With 5,000 people on its payroll it is more than the north-east's biggest manufacturing employer. It is an icon of the revival of a region which had begun to turn the corner after decades of decline.

Yet inside, as the light faded, union reps were in negotiations with the Nissan management over the modalities of the redundancy announcement which had been made the day before, sending shock waves throughout British industry. Some 1200 jobs – a quarter of the total workforce – were axed, prompting fears for the jobs of the 10,000 outside workers who supply the giant car-makers.

"It scares you," said a shopper loading bags into her car in a cut-price Aldi supermarket just down the road. "If a firm as established as Nissan can get rid of 1200 jobs in one go it frightens you that your job could be next."

As she spoke two of Nissan's local suppliers announced redundancies. "It could ripple throughout the supply chain," said Davey Hall, the regional secretary of the carworkers union, Unite, as he came out of the plant. "It will have a big impact on suppliers, and on the wider local economy where pubs and shops are already closing."

If it can happen at Nissan it can happen anywhere for the car plant stands for the best of British industry.

In the Eighties when the pits, the shipyards, the steel and the chemical works all took body blows, many of which turned out to be mortal, Nissan stood out as a saviour of the region. For the North East, one of Britain's worst-hit areas of unemployment, to be chosen as the site of the giant Japanese company's British car plant was hailed as a modern miracle. It stood for high technology, the latest working practices and a new model of co-operative trade unionism – everything lauded as necessary to the new Britain by the then Prime Minister Margaret Thatcher who opened the plant in 1986.

The model is still in place. Yesterday the union man, Davey Hall, was not railing against management or government. He was not even calling for a bail-out. "One firm can't ask for one; every firm would want one," he said. Instead he called for government money for retraining and a more generalised manufacturing sector support and concentrated on negotiating as good a redundancy package as he could.

"No-one is going to volunteer unless there's a good deal on the table, and we're hoping to get the 800 redundancies [the other 400 job cuts will be workers on temporary contracts] from volunteers," he said. "After all the lads who started in their 20s and 30s in 1986 are reaching the age where they might be happy to take a good early retirement deal."

It is to such moderate trade unionism that many attribute the success of the plant which turned out its five millionth car in June 2008. Indeed only a year ago it was announcing an 800 extra jobs to cope with demand for its chunky five-door hatchback, the Qashqai. Earlier this year the firm announced a new £55 million investment, supported by £6.2m from the Government, for a new model to be produced at Sunderland from 2010 to replace the Micra, whose production is being moved to a factory to be built in India.

But then came the credit crunch. People who tried to get loans to buy new cars found their applications rejected. Nissan had sold 66,336 cars in the UK in 2008 – only 0.14 per cent fewer than in 2007 – a much better performance than the national average, which saw new car sales slump 11.3pc.

But then last month sales for its cars plummeted 26 per cent. Some locals say the figure was even worse; sales are down 40 per cent they say. A few weeks ago 3,500 production-line workers were sent home as the plant has brought forward its annual Christmas shutdown.

Down the road from the plant Cedric Morse is part of the problem. The 78-year-old former shipyard welder was in the local Evans Halshaw showroom replacing his Nissan Almeria. "It was stolen on Christmas Eve," he explained. "I was closing the garage door and the thief was in and away in a flash." Yet he is not replacing it with another Nissan, but with a compact Chevrolet. "The wife wanted something smaller."

Cedric feels sorry for the lads at Nissan, he says. "But things won't be so bad as they were for me. When I got laid off at the age of 59 the shipbuilding industry died with me. I never worked again. But once the market picks up they'll get engaged again."

Yet others fear exactly the same thing could happen in the car industry which employs 850,000 nationwide and which generates £51bn for the British economy every year. "It is imperative that we protect our skills base," said Derek Simpson, joint general secretary of Unite, "otherwise Britain will come out of recession considerably weaker."

Many locally share those fears, and the wider damage they might do. "It'll have a big impact on the local economy, and not just on Nissan and the support sector," said Stephen Garrett, 35, a financial controller for a manufacturing firm, as he waited outside the supermarket for his wife. "Nissan is a world leader and this is the No 1 manufacturing plant in Europe. The job losses will harm the general image of the region. There's a lot of retraining going to be needed."

Some of that had already begun. Nissan workers who had been reduced to four-day working have been travelling up the road on the fifth day to do training at Gateshead College. "We've been trying to raise the skills level," says the FE college's deputy principal, Dr Kim Davies, "improving business techniques on lean production and improving sustainability, reducing waste, conserving energy and so on. We have been doing team management for shop floor workers who become supervisors."

But though 2,500 Nissan workers have been through the process it has not saved one in four of their jobs, though it may make it easier for some of them to find new work. "Bad times bring the need for more of this kind of work," Dr Davies said.

Others are less optimistic. Back at Aldi Mrs Jan Cowie, a 42-year-old teaching assistant, was gloomy. "I know at least three families who have someone on temporary contracts at Nissan who will lose their jobs. They've all got children and mortgages. It scares you to think that a firm as established as Nissan can get rid of 1200 jobs in one go. It makes you think it could be you next – or that they money that was due to go into schools might not materialise. These are very uncertain items. My husband is a builder and it's all just bits and pieces".

Loading Aldi bags into the next car, Mrs Janet Baxter, 40, was just as gloomy. "My ex husband works in one of the factories that supply Nissan," she said. " It's going to be a nightmare. My son will leave school in May when he's 16. What is there for him to do? An apprenticeship at Nissan would have been ideal, but he'll probably just have to stay on at school." Education was a default not an aspiration. "Everywhere you look its doom and gloom.

"Normally I just go to Morrison's to get everything. But now I'm afraid to do that. My income isn't reduced at present but you have to make savings. That's why I'm here at Aldi and I'm off to Netto next. You've got to be cautious. You can't just wait till something hits you in the face."

The road leading from Nissan is called Cherry Blossom Way. It is the route for the 50A bus whose journey ought to take locals from a dour past to a brighter future. South Shields, Bolden Colliery, Nissan factory, reads the route map.

But the bus now travels through a bleaker landscape. "For sale or to let," says the sign at the adjacent factory. "100,000 sq ft. Unlimited expansion potential." The limits are all too evident now.

Next stop is the aggressively-named Turbine Business Park. Its sign speaks of an optimism that now seems utterly forlorn. "250,000 sq ft large industrial, 75,000 sq ft small industrial, 75,000 sq ft hybrid workshops industrial, 100,000 sq ft small units, 85,000 sq ft large office and 120,000 sq ft hotel and leisure, 10,000 sq ft ancillary," it boasts. Such were to be the parameters of ever-growing prosperity.

But today all you see are the skeletal shapes of tarmac roads and lonely lampposts amid a landscape of expansive mud and icy ponds. The dream is over, for the present at any rate.

... but the super-rich keep Spirit of Ecstasy flying high for Rolls-Royce

As the global recession wreaks havoc in the car industry, and major UK vehicle manufacturers lay off workers in their thousands, the super-rich are buying more Rollers than ever.

Plummeting economic confidence and frozen credit lines have sent car sales down by nearly a third compared with last year, with devastating results. Nissan announced 1,200 redundancies at its Sunderland factory this week, Jaguar Land Rover is already letting 1,450 staff go, and the industry is begging for government aid.

But Rolls-Royce has had a bumper year. Some 1,212 of the prestigious marque's £250,000-a-pop motors were sold in 2008 – not only 20 per cent more than the year before, but the company's fifth annual sales increase since it was reborn as a subsidiary of BMW in 2003. Although more than a third of Rolls-Royces are sold to Americans, the "Spirit of Ecstasy" flying lady mascot is fast becoming the status symbol of choice in the Middle East, China and Russia.

Yet even Rolls is "hunkered down for a tough 2009", according to the chief executive. "We have had a good 2008 and we are proud of that, but we have to be cautious about the change of economic weather and we don't want to appear celebratory," said Tom Purves. "Rolls-Royce does have a certain degree of insulation, because our customers do, but we are not immune."

Forward orders took a sharp dive after the collapse of Lehman Brothers investment bank in September. With slowing growth in China, and major problems for the Russian economy, even the world's richest took fright. Rolls was forced to scale down production and plans to hire extra staff to build the RR4 "Baby Rolls", which go on sale in 2010, are being put back.

Professor Garel Rhys, at Cardiff Business School's Centre for Automotive Industry Research, said sales of Rollers in 2009 will drop back under 1,000. "All the top-end manufacturers are facing carnage," he said.

By Sarah Arnott