Honda to shut UK factory in latest blow as Brexit looms

Bloomberg

Honda Motor Co. said it plans to close its factory in the UK in the biggest blow yet to the British auto industry already buckling under thousands of job cuts and the loss of key models in the run-up to Brexit.
The site in Swindon, about 80 miles west of London, is the nation’s fourth-largest auto plant and employs about 3,500 workers where the Honda Civic hatchbacks are made. The facility will be closed in 2021, the company said on Tuesday.
Britain has long been a Japanese hub for European auto production, with Honda, Nissan Motor Co. and Toyota Motor Corp. owning three of the country’s six largest factories. With demand stagnant and new technology claiming more cash, carmakers in Japan and elsewhere are under pressure to tighten spending. Brexit adds another layer off uncertainty: Nissan this month reneged on plans to build the X-Trail sport utility vehicle in Sunderland, citing the unresolved status of EU-UK trade after Brexit.
Honda said the move comes as it “accelerates its commitment to electrified cars, in response to the unprecedented changes in the global automotive industry.”
Brexit is one factor in slowing demand in Europe, but major markets including China are also declining. Looming trade conflicts are adding to the drag, with European automakers bracing for potential US import duties.
UK-made products separately risk being disadvantaged by a new treaty that will gradually eliminate tariffs on Japanese imports to the EU. Still, Chief Executive Officer Tak-ahiro Hachigo said the UK’s divorce from the EU wasn’t a factor in Honda’s move, but the company changing its production as the industry moves
toward electric cars.
Honda plans to import electric vehicles to Europe from Japan and China, Hachigo told reporters in Tokyo. The company will also boost manufacturing of the Civic in North America, where 55 percent of the models made in the UK are currently exported to. The company’s European headquarters will remain in Britain.
Honda shares rose 0.4 percent in Tokyo on Tuesday. The plant closure will boost Honda’s operating profit by more than 30 billion yen ($271 million) annually from 2023, according to an estimate by Koichi Sugimoto, an analyst at MUFJ Morgan Stanley in Tokyo.
Under Hachigo, Honda is undergoing a sweeping restructuring of its global footprint. In Japan, it’s planning to end car production at a major plant for the first time in the company’s history, concentrating output to a new facility from 2022.
The company’s Swindon plant was established in 1985. It has operated at less than full capacity in recent years as demand in Europe slumped, prompting Honda to suspend a production line with a capacity of 100,000 units in 2014.
The decision was “deeply disappointing,” UK Business Secretary Greg Clark said. The EU-Japan Economic Partnership Agreement, in force since Feb. 1, ensures that the bloc’s 10 percent tariff on Japanese car imports will be reduced to zero over the next 10 years.
The treaty makes it easier for Japanese automakers to localize production at home for sale in the EU, consulting firm LMC Automotive said in a report this month. The UK is most at risk because almost half of the cars made in the country are Japanese branded, and Japanese automakers want to increase utilization of plants at home.
“Should Britain leave without a deal and WTO tariffs are applied to UK vehicle exports, the same cars made in Japan may well end up costing less to import into the EU than those produced just over the Channel in England,” LMC’s director of global production forecast, Justin Cox, said in the February 11 report.
The UK industry has already been battling a slowdown blamed on Brexit, European emissions rules and a drop in popularity of diesel-powered cars. With supply bottlenecks possible, several plants moved up their summer breaks to coincide with the exit from the trade bloc on March 29.