Hitachi Says Brexit May Hurt U.K. Rail Plant Once Exports Needed

(Bloomberg) -- Hitachi Ltd. said Britain’s vote to quit the European Union may become more of a concern when the Japanese conglomerate’s train factory in northern England becomes more reliant on exports after 2019.

For the next few years the Newton Aycliffe plant will be busy making the vehicles it was set up to build when Hitachi won Britain’s biggest express-train contract, so that there has been “no direct damage” from the Brexit vote, Hiroaki Nakanishi, the company’s chairman, said in a Bloomberg Television interview Friday.

“The U.K. rolling-stock factory is already full up to 2019,” Nakanishi said at the World Economic Forum in Davos, Switzerland. “Afterwards maybe we need to make some sort of products to be exported, and that might be troublesome. But up to 2019 we don’t have any problems about the factory’s operation.”

Hitachi spent 82 million pounds ($101 million) on its U.K. plant, which will employ more than 700 people and is making 122 Intercity Express Programme trains as part of a 5.7 billion-pound project to replace rolling stock on Britain’s East Coast and Great Western main lines.

The site will also produce AT200 and AT300 commuter and regional units for Scotland and northern England and could potentially build Japanese-style bullet trains for Britain’s HS2 line, which is still at the planning stage. It’s also intended to be a focus for Hitachi’s rail exports into mainland Europe.

Hitachi expanded its European train manufacturing options with the purchase of the Italian rail business of Finmeccanica, now Leonardo SpA, in 2015. Nakanishi said acquisitions will remain central to Hitachi’s growth strategy across its businesses, and that it always has targets in mind, while declining to elaborate.

The chairman said it’s not yet clear what impact a Donald Trump presidency in the U.S. will have on Hitachi’s markets and America’s relationship with Japan and other East Asian nations. He added that the Trans-Pacific Partnership trade deal between Pacific Rim countries, which Trump has opposed, should be kept.

To contact the reporters on this story: Christopher Jasper in London at cjasper@bloomberg.net, Erik Schatzker in Davos, Switzerland at eschatzker@bloomberg.net, Chris Cooper in Tokyo at ccooper1@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Chris Reiter at creiter2@bloomberg.net.