Stay or leave? Manufacturers oppose the difficult choices of Brexit

ST ATHAN, Wales / GAYDON, England (Reuters) – In three former Royal Air Force cavernous hangars set up on a former air base in Wales, luxury automaker Aston Martin is going ahead with the construction of a new vehicle badembly plant.

The paint shop is ready, the robots are unpacking, and the production of the company's new essential sport utility vehicle is about to start this year – agreement with Brexit or not.

"I still have to believe that we will make a fair and appropriate decision, because a Brexit without an agreement is frankly crazy," Andy Palmer, CEO of Aston Martin, the company's headquarters in Gaydon, told Reuters England, where designers are currently working on various projects. range of vehicles for the 2020s and beyond.

The headlines have focused on plant closures and job losses in view of Britain's and the EU's divorce.

Nissan has abandoned construction plans for its new X-Trail SUV in the country, while Honda will close its only car plant in the UK in 2021 with the loss of 3,500 jobs – although the decision is not related to the UK exit from the EU.

However, many automakers – from luxury brands like Aston Martin to mainstream brands such as Vauxhall – are looking for ways to survive after March 29th.

On the outskirts of London, Vauxhall employees in Luton are gearing up to produce a new line of commercial vans following a new investment from PSA, the owner of the brand, on which they plan to maintain more than 1,000 jobs.

While market conditions after the Brexit remain a big unknown, Stephen Norman, director of Vauxhall, told Reuters that the exit of the UK from the European Union could provide an opportunity to increase the share market brand. He is pursuing a marketing campaign to stimulate the demand for low-priced cars and SUVs.

The ongoing investment by some automakers and the potential sales increase perceived by Vauxhall reflect the competing decisions and opportunities that brands face in terms of size, customers and the state they are in. of production.

In any case, all British car manufacturers will have to find ways to make Brexit work even in the short term.

Nissan builds nearly 450,000 cars and many models, which makes any upcoming exit of the country difficult. Toyota only builds one model in Britain, the Corolla, but is just starting to manufacture it – in an area where the vehicles' life cycle is usually seven years old.

RACKS OF DASHBOARDS

Aston Martin and Vauxhall are as different as can be two car manufacturers. Now the Brexit has thrown Palmer and Norman into the same precarious boat that, just like their rivals, they seek to minimize the potential damage of a messy British outing.

Both companies have significant manufacturing activities in the UK and employ thousands of people in the country. In interviews, Palmer and Norman both said that the impact of Brexit would be more complex, more invasive and longer to implement than decision makers and the public would have thought.

For Aston Martin, which sells sports cars at prices well over 100,000 pounds (130,380 dollars), the new European tariffs on cars built in Britain are not a major concern, said Palmer.

Like other small players such as Bentley, Rolls-Royce and McLaren, Aston has much larger margins on its cars and the additional costs can be more easily pbaded on to wealthy customers. This is not a luxury appreciated by the players in the mbad market.

What's more of a concern to Palmer is the disruption of his company's supplier network and his carefully planned production system.

When he walks into Aston's factory in Gaydon, Palmer points several rows of dashboards mounted on racks and crammed into a corner of the factory.

Aston is building up stocks of essential parts in case a brutal, transaction-free Brexit results in trucks whose components would be delayed by the chaos of British ports. It increases the number of days of stock it holds from three to five days and could fly in places if ports get plugged after March 29th.

Most Aston engines are delivered by a Mercedes-Benz factory in Germany. New border controls and new tariffs could delay these shipments.

Returning to a cross-border tariff regime and rules of the World Trade Organization, after decades of free trade, would require Aston and its suppliers to research and document the provenance of all parts of a vehicle, Palmer told Reuters.

"When you have 10,000 pieces on a car and then you have all the subparts and subparts, you quickly get hundreds of thousands of pieces. And do you honestly know where they all come from? Often not, he says.

That's one of the reasons why Palmer said he hired a supply chain manager, which was announced last month. "His obsession at the moment is to plan Brexit," he said.

The Brexit vote in mid-2016 took place while Aston Martin pursued a multi-year strategy, unveiled in 2015, of manufacturing around 3,500 sports cars a year and building up to 14,000 sports cars and SUVs a year.

The St Athan plant will start building DBX SUVs, and then start badembling a new line of luxury electric vehicles under the Lagonda brand in the early 2020s.

Breaking that investment is not Aston's plan.

"People have asked me: what's stopping you from sleeping?" Said Palmer. "It's really the supply chain and the capacity of this chain to absorb all the macroeconomy that is launched to them."

Aston is not alone in this case: Volkswagen, the largest car salesman in Britain, and Honda both said they stocked parts, while Jaguar Land Rover had discussed with companies and that Bentley had rented storage space.

IN THE CHAOS, OPPORTUNITY?

At Vauxhall, Norman said the Brexit could be an opportunity for a brand that has struggled under its former owner, the American manufacturer General Motors, and is considering a new strategy for the French group PSA.

According to Vauxhall, a Brexit without an agreement would lead to a drop of up to 20% in the demand for new British vehicles, but a larger market share for Vauxhall.

PSA committed last year to new investments to launch new models in its Luton van plant. However, next year, the decision to maintain or not the Vauxhall plant at Ellesmere Port after the end of the current race of Astra Sports Tourer.

This decision is not simple, Norman said.

"It would not be true to say that a hard Brexit automatically means shutting down factories in the UK, neither for us, nor for other manufacturers, but it would certainly mean that they're doing it." Purpose of greater surveillance, "he said.

British workers should generate productivity gains that offset customs duties and friction in the supply chain.

Currently, Vauxhall, bought by parent company PSA in 2017, accounts for 7.5% of UK car sales.

Adding the Peugeot, Citroën and DS brands of the group, the total stands at 13%, making PSA one of the largest sellers of the automotive market No. 2 in Europe.

If the market suffers, Vauxhall's emphasis on functional and economic models could be an advantage, Norman said.

"People will look very long and hard," he said. "And they will say: do I need this reinforced brand, which I pay in reality, which has no material value or that I should not look more seriously at the Vauxhall offer … and have such a good vehicle and not having to pay through the nose for the privilege. "