European Car Lobby Warns No-Deal Brexit Threatens Business Model

(Bloomberg) -- Europe’s car lobby said a no-deal Brexit would threaten the very business model of companies operating in the U.K. and on the continent, urging negotiators to do everything in their power to avert a worst-case scenario on the eve of a summit in Brussels.

Carmakers and suppliers’ steps to prepare for the event of a disorderly withdrawal from the European Union -- such as pulling forward scheduled production stops and stockpiling parts -- won’t be enough to mitigate operations for plants that receive and fit millions of components every day, the European Automobile Manufacturers Association, or ACEA, said Wednesday in a statement.

“The clock is ticking, but it is not yet too late,” said Erik Jonnaert, ACEA’s secretary general, attending a conference in Brussels. “That is why we are urging the negotiating teams on both sides to redouble their efforts to successfully conclude a withdrawal deal.”

U.K. Prime Minister Theresa May is heading to Brussels Wednesday for a summit to address an impasse in Brexit negotiations over a policed border with Ireland. The U.K. is set to leave the European Union on March 29, 2019. A so-called no-deal Brexit, triggering cumbersome customs clearance processes, would be particularly punishing for carmakers, who rely on parts being delivered to production plants sometimes minutes before they’re needed.

In addition, a lack of a trade agreement would mean World Trade Organization tariffs -- set at 10 percent for cars -- would apply for vehicles traded between the EU and the U.K.

Rotting Buildings

“If we are continuing to be taken hostage of this situation, the UK flourishing industry for automotive could come back to the situation where it was 20 or 25 years ago,” Roberto Vavassori, a board member of brakemaker Brembo SpA, said at the conference “I sincerely hope that our industry is no longer taken as a hostage with these negotiations.”

BMW AG, which makes Rolls-Royce and Mini cars in the U.K. as well as engines, has no plans to reduce capacity at the Mini factory in Oxford, customs manager Stephan Freismuth told reporters in Brussels. BMW will shut down the facility for one month in April as part of its contingency plans. A hard Brexit would force the carmaker to build in the Netherlands, Chief Executive Harald Krueger said at the Paris car show earlier this month.

The German manufacturer is looking for additional storage space for parts, to help deal with expected bottlenecks at the Euro tunnel, Freismuth said. BMW receives around 120 trucks carrying components each day. Around 80 percent of the Mini models made in Oxford are exported.

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