Nissan’s stark no-deal warning as UK gov tries to find support mechanisms

14 October 2019

Nissan’s stark no-deal warning as UK gov tries to find support mechanisms

14 October 2019

The UK Government is looking at ways of supporting the country’s automotive industry as Brexit looms, with Nissan warning over the future of its plant in Sunderland.

Should the UK leave without a deal on 31 October, World Trade Organisation rules dictating a 10% tariff on imports and exports would come into effect, a move Nissan Europe chairman Gianluca de Ficchy has said would be impossible to offset through cost cuts.

‘The only clear conclusion we have reached is that if there were to be a no-deal Brexit with the imposition of WTO tariffs, it will not be sustainable,’ he said. ‘That will represent a significant cost increase which would make our products less competitive.’

Unviable situation

The warning adds more pressure on Sunderland, which has already seen a cut in investment with planned X-Trail production cancelled, while rumours persist that building of its SUV models could move overseas. Last week, the carmaker announced it was reducing the number of shifts from three to two, although there would be no job losses or production cuts.

De Ficchy said assessing the future of a plant, which sends 70% of its output to the EU, is not a straightforward process. Nissan still believes Sunderland, which directly employs 6,500 people, has strong assets, he said.

However, the Japanese carmaker is struggling by falling sales and the scandal surrounding Carlos Ghosn. Earlier this year it announced a cost-cutting programme, in which it said both jobs and plants are under review.

‘The only clear conclusion we have reached is that if there were to be a no-deal Brexit with the imposition of WTO tariffs, it will not be sustainable …That will represent a significant cost increase which would make our products less competitive.’

Nissan becomes the latest carmaker to highlight that it will not be able to absorb tariff costs, following Honda and Volkswagen, although the former will be closing its UK operations in 2021.

Meanwhile, business minister Nadhim Zahawi has said the government is in talks with companies including PSA Group, Toyota, Ford, Nissan and Jaguar Land Rover (JLR) to establish where the ‘pinch points’ and 'pain' would be if the UK leaves the European Union without an agreement

‘There are a number of levers available to me, to us in government to be able to help those businesses,’ Zahawi said in an interview when asked whether loan guarantees were possible.

Carmakers have been increasing pressure on the UK Government to agree a deal with the EU that will see free trade between the country and the bloc continue. The Society of Motor Manufacturers and Traders chief executive Mike Hawes added: ‘‘The UK and EU automotive industries are deeply integrated, so we need a deal that guarantees free and frictionless trade. Anything less risks destroying this vital industry.’

Increasing closure threats

Alongside Nissan’s warnings, PSA Group boss Carlos Tavares has indicated that if no-deal occurs, it will consider closing its Ellesmere Port plant, moving production of the Opel Astra to a European facility. Ford and Honda are already closing factories in the country, while BMW is moving some engine production out of the UK.

UN trade body Unctad warned that a no-deal Brexit would cost UK businesses at least $16 billion (€14.5 billion) in lost sales due to the imposition of tariffs on exports.

By its calculations, UK car exporters would be the hardest hit, losing about $5 billion (€4.5 billion) in sales to the EU.