Automakers In The U.K. Warn A No-Deal Brexit Could Cause Huge Production Declines

Mar 5, 2019
Originally published on March 5, 2019 6:24 pm
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AUDIE CORNISH, HOST:

With Brexit just 24 days away, automakers in the U.K. are warning that leaving the EU without a deal could be devastating. Today BMW said it would have to consider ending production of a type of MINI at its factory in Oxford. And Toyota said a no-deal Brexit threatens future investment at a plant that currently makes the Corolla. For more on the economic impact of Brexit, we turn to NPR's Frank Langfitt, speaking to us from London. And, Frank, help us understand how leaving the EU with no deal affects carmakers specifically. Like, why are we hearing these warnings now?

FRANK LANGFITT, BYLINE: Well, the fear is of course when March 29 rolls around, and if the U.K. leaves without any deal, tariffs would kick in, in terms of being able to export cars over to the European Union, as well as engines. And that would make cars here a lot more expensive, much less competitive in Europe. And there's an industry group that estimates this could add billions of dollars in costs to the cars in terms of their prices. Well, remember the reason that many foreign carmakers actually set up factories here in the U.K. is because of tariff-free trade with the European Union. And a no-deal Brexit could end all that.

Now, the question you asked - which is, why now? - it's pretty clear that the - these - particularly these auto companies, they want to put maximum pressure on Parliament to approve Prime Minister May's deal, which is scheduled for a vote as early as next week, and begin to end what for them has been 2 1/2 years of complete economic uncertainty.

CORNISH: And you're hearing this in your reporting, right? You were talking to auto industry folks in Wales. I didn't know Wales was a big auto industry spot, but...

LANGFITT: It is.

CORNISH: ...What did you hear there?

LANGFITT: It actually is. And I visited this place called Espack. It's a Spanish logistics company. Ninety percent of their business is managing parts for a nearby Ford engine plant. They've already seen over - in recent months, decline in orders from Ford. I was speaking to a guy named Jorge Escalada. He owns the company. And he says the problems they're seeing - and the U.K. industry in general - is a confluence of events. You've got an industry that's struggling globally with falling sales in China, plunging diesel sales in Europe following that VW emissions scandal, as well as the transition to electric vehicles. This is how Jorge Escalada put it.

JORGE ESCALADA: It's not just Brexit. It's - I think it's a accumulation of things, you know, coming together at the same time. Our main client, Ford Motor Company, is not in good shape in Europe. All these regulations with emissions, going to electrification, the plant that we supply is a petrol engine plant.

LANGFITT: And basically, Audie, almost everybody I've talked to in the industry says that uncertainty over Brexit hangs like a cloud over everything.

CORNISH: So we know what's at stake for the industry. What about what's at stake for the U.K.?

LANGFITT: Well, what's at stake for the U.K. - economically, there's, you know, terrible concern that Brexit is going to cause a lot of damage here, especially a no-deal Brexit. In the auto industry, you've got over 800,000 people employed, directly and indirectly. Many of those are high-paying jobs in struggling areas. And in the short term, there's concern about production moving away, layoffs. But the bigger concern is the long term. I was out in Wales. I talked to a guy named Peter Wells. He's a professor at the business school there at Cardiff University, focuses on the auto industry. And this is what he told me.

PETER WELLS: All our key volume players are concerned at this situation. If they all retrench on production, then the whole ecosystem of skills, of engineers, of suppliers, of R&D - and even universities - that whole ecosystem starts to crumble. And when that happens, we don't have an industry anymore.

CORNISH: Frank, before I let you go, I want to ask the thing I always ask, basically, at the end of these interviews...

LANGFITT: Sure.

CORNISH: ...Which is how likely is it that Britain will leave the EU without a deal at this point?

LANGFITT: It is not that likely. What we're going to see next week probably is a vote on - on May's deal. If it doesn't pass, the next day there'll be a vote on whether to have no deal. Most people don't think Parliament will pass that. But if you're the auto company, you'd be happy that there won't be no deal.

But then the next choice would be delay. And they don't like that either because all along - and what most businesses I've been talking to now for two years in this country - is they want to see clarity and certainty on what Brexit is going to look like because they can't make investment decisions. They can't look to the future. And that's what they really want out of this government.

CORNISH: That's NPR's Frank Langfitt. Frank, thank you.

LANGFITT: Happy to do it, Audie. Transcript provided by NPR, Copyright NPR.