No-Deal Brexit Would Be ‘Devastating,’ European Carmakers Warn

(Bloomberg) --

With under six weeks to go before the U.K. is scheduled to exit the European Union, automakers are warning that departing without a deal would have dire consequences for their industry.

“A no-deal Brexit would have an immediate and devastating impact for the industry, undermining competitiveness and causing irreversible and severe damage,” Mike Hawes, the chief executive officer of the U.K.’s Society of Motor Manufacturers and Traders, said in a statement Monday. More than 20 trade groups from across the region joined the effort.

Over decades, Europe’s carmakers have developed supply chains that depend on the smooth movement of goods across the bloc. Each vehicle is built from about 30,000 parts, many crossing borders multiple times. An end to barrier-free trade would disrupt these just-in-time operating models, with each minute of stalled production in the U.K. alone costing some 50,000 pounds ($62,500), the trade groups estimated.

If Britain does crash out of the bloc, U.K. carmakers would no longer be party to EU trade deals and would lose preferential arrangements with 30 countries, including Turkey, South Africa, Japan and South Korea, the trade groups said. What’s more, the imposition of World Trade Organization duties could drive up carmakers’ costs by 5.7 billion euros ($6.3 billion), they warned.

That would be a blow for an industry already dealing with manifold challenges, from sluggish sales to the U.S.-China trade war and a costly shift to electric vehicles.

Read more: Johnson Takes Bid for Brexit Deal to New York as Clock Runs Down

Carmakers have warned a hard Brexit would mean shifting production out of the U.K. Nissan Motor Co. abandoned plans to make its X-Trail SUV at its plant in Sunderland, England, while BMW AG has set aside 300 million euros to deal with any Brexit-related costs and said it would reduce output at its factory in Oxford should the U.K. opt for a hard exit.

Prime Minister Boris Johnson has pledged to take Britain out of the EU “do or die,” with or without a deal, on Oct. 31 -- even after Parliament passed legislation to force him to delay should he fail to secure an agreement. While his tough stance may be a negotiating tactic, it creates unwelcome uncertainty for carmakers and other businesses.

“Even the repeated need to plan and implement contingency measures to deal with a disorderly Brexit is highly disruptive,” Erik Jonnaert, secretary general of the European Automobile Manufacturers Association, said in the statement. “The European automoible industry therefore calls for all sides to rule out a ‘no deal’ scenario as soon as possible.”

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