U.K. Carmakers Hit by $628 Million Brexit Tab Call for Deal
Nissan last week warned that tariffs would hurt its U.K. plant.
(Bloomberg) -- U.K. carmakers, already reeling from more than 500 million pounds ($628 million) in costs to prepare for Brexit, made an eleventh-hour call on the government to strike a deal with the European Union to safeguard the future of the industry.
Crashing out of the EU would threaten jobs and the sector’s long-term survival, the Society for Motor Manufacturers and Traders said in a statement on Tuesday. Ahead of the Oct. 31 Brexit deadline, one-third of U.K. automotive companies are cutting jobs and 77% have seen a negative impact on business, according to the lobby group.
Brexit is threatening what had been a renaissance in carmaking in the U.K., as foreign investment in plants over the past decades helped offset the takeover or closure of some longstanding British car brands. Last week, Nissan Motor Co. issued its starkest warning yet against a ‘no-deal’ scenario, saying any tariffs on auto exports to the EU are likely to render its U.K. operations unviable. The lobby’s previous estimate, in June, for the cost of preparing to leave was about 330 million pounds, an SMMT spokesman said.
“As the Brexit clock ticks ever closer to midnight, this survey reveals the bleak future that awaits this vital sector in the event of ‘no deal’,” said Mike Hawes, SMMT’s chief executive officer in the statement. “Damage has already been done.”
Export tariffs would make locally built autos uncompetitive when sold in mainland Europe, and customs checks and red tape would disrupt ultra-efficient, just-in-time supply lines, carmakers say. Margins are already wafer thin and many manufacturers will not survive the application of tariffs, SMMT said, adding that the cost of a ‘no-deal’ Brexit would be 50,000 pounds a minute.
The European Union’s chief Brexit negotiator, Michel Barnier, has said a deal is possible this week -- but talks remain tough. Discussions will continue throughout the day in Brussels as the two sides try to agree on how far Northern Ireland will be detached from the EU’s customs union.
As the deadline draws closer, automakers have made increasingly strong warnings about the effects of Brexit and measures that will be taken to mitigate the impact on operations. Toyota has said it will halt production Nov. 1, resuming Nov. 4 with two days of stockpiled inventory.
PSA Group Chief Executive Officer Carlos Tavares warned in July that all production will be pulled from its Ellesmere Port plant if Brexit makes it impossible to turn a profit at the 1,000-worker Vauxhall-brand facility.
Nissan has suggested it may move some production out of the U.K. if the country leaves the EU without a deal.
Nissan, which sends 70% of its U.K. output to the EU, has urged the government to support the industry by agreeing with the bloc not to apply tariffs. The imposition of WTO rules with a 10% duty on U.K.-built cars shipped to the EU would be impossible to offset through cost cuts, Nissan Europe Chairman Gianluca de Ficchy said last week.
BMW AG plans to halt production at its Mini plant in Oxford for two days on Oct. 31, and has said it would reduce output by eliminating a work shift in the event of a no-deal split.
In the first week of November, Jaguar Land Rover will halt operations for a week, regardless of whether or not a deal is reached. CEO Ralf Speth has said that the uncertainty about Brexit made it extremely difficult to plan logistics and that the carmaker depended on multiple vendors in Europe for its parts.
To contact the reporter on this story: Siddharth Philip in London at sphilip3@bloomberg.net
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, Andrew Noël
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