Honda, the fourth largest car producer in the UK, has unveiled plans to halt its UK production for the first six days of April in order to stockpile parts in the immediate aftermath of Britain’s exit from the EU. The announcement came on Thursday, the same day that UK Premier Theresa May met her Japanese counterpart Japanese Prime Minister Shinzo Abe to discuss Brexit-related issues, and reads as follows:
“Honda of the UK Manufacturing Ltd has been assessing how best to prepare for any disruption caused by logistics and border issues following the UK leaving the EU on 29 March 2019.
“To ensure Honda is well paced to adjust to all possible outcomes, we are planing six non-production days in April 2019.
“This is to facilitate production recovery activity following any delays at borders on parts. These contingency provisions have been put in place to best mitigate the risk of disruption to production operations at the Swindon factory.”
Honda is not alone. BMW, the third largest car manufacturer in the UK, has announced plans to shut down its site in Cowley, Oxford, for maintenance during the whole month of April, in order to minimize the disruption a no-deal Brexit could cause to its production and supply chain.
The fifth largest manufacturer, Toyota, is also considering temporarily ceasing production in the event of supply-chain disruption. “If Britain crashes out of the EU at the end of March, we will see production stops in our factory,” said Marvin Cooke, the managing director of the company’s plant in Burnaston. Asked how long those stoppages could last, he said it was impossible to tell. “It could be hours, days, weeks – even months.”
British luxury automaker Aston Martin also unveiled plans this week to navigate a disorderly Brexit, including signing deals with supplier DHL to allow for the use of ports other than Dover which, as Britain’s busiest harbor, is most likely to be disrupted by customs delays. The firm is also considering the possibility of making air freight deliveries.
“I don’t think we’ve been in a position in the last two years where we’ve been further apart from understanding where we’re going to end up,” said the company’s CEO Andy Palmer.
That global automakers are planning for disruption at the UK border should not come as a great surprise, particularly at this late stage in proceedings. Their sprawling, fine tuned supply chains, reliant on “just-in-time” and “just-in-sequence” delivery and production systems, are as fragile as they are efficient. While any post-Brexit disruption may last little more than a week, at least until the new system falls into place (assuming there is one), it’s the timing of the disruption that could be the problem, coming on the heels of month after month of deteriorating production and sales.
Jaguar Land Rover, the UK’s biggest vehicle manufacturer, has just announced 4,500 job cuts globally, 4,000 of which are in the UK, following two consecutive quarterly losses. The company — which is owned by the Indian behemoth Tata — has repeatedly warned of the consequences of a no-deal Brexit; this week’s raft of job losses are more a result of structural issues facing the global automotive industry than any pre-Brexit angst.
Like many car producers, JLR is reeling from the blow-back of shrinking sales in China, which until very recently was a major growth industry for the group, accounting for around a quarter of global demand. And with nine out of ten of its cars powered by diesel engines, JLR is also particularly exposed to plunging consumer demand for diesel vehicles.
In the UK alone total diesel car sales collapsed 29.6% in 2018, after having already plunged 17.1% in 2017. Since their peak in 2016, diesels sales have dropped by a staggering 42%, from 1.29 million to just 750,165.
Collapsing sales of diesel cars, both in the UK and on the continent, is battering UK car production, which slumped by 19.6% in November compared to the same month of 2017. With around 30,000 fewer cars produced, it was the biggest year-on-year fall of any November since the financial crisis of 2008 and the sixth consecutive month of falling production, according to the industry group, the Society of Motor Manufacturers and Traders (SMMT).
None of these problems are unique to the UK. Car registrations have hit a brick wall in China, the world’s largest market, as part of a broad, gathering economic slowdown. In the world’s second largest market, the US, sales peaked over two years ago and have ticked down since. Even in Germany they have begun to slide in recent months. After years of uninterrupted growth, global demand for new cars has begun to sputter. Now, with Brexit fast approaching and still no sign of a viable get-out clause, it’s perhaps no wonder car manufacturers are worried. By Don Quijones.
This is getting serious. Read… Carmageddon in the UK: Auto Sales Plunge 12% in 2 Years, Diesels in Death Spiral. Consumers, Businesses, Fleets Cut Back
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