The UK auto industry has changed its tone from silent resignation to furious shouts as the government once again failed to gain consensus within parliament on its future relationship with the EU.
Automakers such as Jaguar Land Rover, Nissan and BMW have long opposed Brexit because it isolates the UK from its biggest trading partner, but they were hopeful that a negotiated solution would keep many of the benefits of Brexit in place. current trade association.
However, after parliament rejected Prime Minister Theresa May’s agreement for an orderly separation last week, automakers are bracing for their most feared outcome: leaving the EU on March 29 without any deal.
“I’ve done what any sensible person would do: I assumed the worst,” Aston Martin CEO Andy Palmer told the World Auto News Congress in Detroit last week. “I have assumed that we will leave Europe.”
A no-deal departure means that all the agreements the UK has with the EU are broken, and the trade relationship reverts to the basic rules of the World Trade Organization.
That means tariffs, customs controls at the border to ensure regulatory compliance, and no transition period to facilitate changes.
Inevitably, it would cause queues at ports and seriously damage the delicate supply chain built over the years to ship parts daily to and from continental Europe.
“‘No deal’ would be catastrophic for the auto industry,” said Mike Hawes, head of the UK auto lobby group, SMMT. As with most lobbyists, his harshest words were generally saved for closed-door briefings. No longer.
Automakers are in advanced stages of planning to counter the parts supply disruption after March 29 in a no-deal outcome. Honda will close its UK plant for six days in April, while BMW will advance its summer closure at its Mini plant. Aston Martin and Bentley have rerouted parts to bypass Dover’s key access port, even in the case of Aston using aircraft.
“Fortunately, our business is small enough that we can see flying parts of Europe,” Palmer said at the forum in Detroit, just as news of the no-vote in London appeared on the phone screens of attendees.
“We have a 12-week planning period for our production, so we order the parts 12 weeks before the car is built. Obviously, that time period now spans March 29 and is therefore no longer academic for we … It’s real. “
At Bentley, CEO Adrian Hallmark said the company had two scenarios to run production in April, if there is a deal. “Either close for one day a week for five weeks, or close for a week.”
Ford has made its own preparations for its two engine plants. But the company still believes the UK will either strike a favorable deal with the EU or cancel Brexit entirely, possibly after a second referendum.
“Ford continues to see a no-deal exit as the least likely outcome given the damage it could do,” CFO Bob Shanks said at the Deutsche Bank conference in Detroit last week. “Such a situation would be catastrophic for the UK industry and for Ford’s operations in the country.”
As with JLR, Ford’s troubles in Europe go beyond Brexit, with both companies announcing cost cuts this month that involved significant UK job losses. Ford’s recovery strategy does not include closing its plants in the UK, but that could change in a no-deal situation.
“Nothing would be off the table in a difficult Brexit,” said Ford of Europe CEO Steve Armstrong.