Bad news has been hitting the British car industry since the start of the year. In January Jaguar Land Rover announced 4,500 redundancies, mostly in Britain.
In February Honda said it would close its Swindon plant, threatening 3,500 jobs directly and thousands more indirectly. Nissan reversed its decision to produce a new sports utility vehicle in Sunderland.
Last week it cancelled production of two Infiniti models made in the same plant. Meanwhile, car production in Britain has been falling since 2016. New spending has dropped by 90 percent in the past five years.
How much is this to do with Brexit? Didier Leroy, head of Toyota in Europe, has said that a no-deal Brexit would be “terrible” for the company. This reflects the fact that the car industry was rebuilt in Britain in the 1980s and 1990s mainly by Japanese companies building plants here to get access to the European Single Market.
The tariff and customs barriers a no-deal Brexit would create would seriously disrupt the transnational production networks running across the Channel on which the car industry relies.
But the problem can’t be reduced to Brexit. A new free trade agreement between Japan and the European Union (EU) came into force last month. By 2027 this will scrap tariffs on Japanese cars imported into the EU. Ironically this was included at the behest of the British government to support the Japanese car companies based here.
But they invested in Britain in the first place to get round the tariff barriers that used to keep their exports out of the EU. Soon they will be able to produce for the European market directly from Japan. Both Honda and Nissan are shifting the production they are scrapping in Britain to Japan.
To a significant extent this represents a retreat from Europe altogether, which the Japanese car giants see as a less important market than the US and China. Honda is shutting down its Turkish plant as well.
Ford is cutting back thousands of jobs in Europe—5,000 in Germany and at least some in Britain, in a move that certainly has nothing to do with Brexit.
There are much larger forces at work. General Motors announced in November that it was closing seven plants, four in the US. Demand for passenger cars is falling, while that for 4x4 vehicles has been rising. This reinforced car companies’ hope that by switching to diesel they could meet more demanding targets for CO2 emissions.
But the scandal over Volkswagen rigging its emission tests has highlighted the fact that diesel cars produce highly harmful soot and fine particles.
These problems are speeding up the switch to hybrid and electric cars. But this requires huge investment. Moreover, because of the scale and complexity of the technological changes involved, the established car firms feel vulnerable to new entrants. These include Tesla, which is headed by the erratic Elon Musk and is also pioneering self-driven cars.
All these pressures on car firms are leading to dramas different from Brexit. The most remarkable is that surrounding Carlos Ghosn. Until recently this Lebanese?Brazilian businessman headed up the Triple Alliance of Renault, Nissan, and Mitsubishi Motors.
The development of this alliance since the end of the last century is a sign of car firms’ need to rationalise and merge. Mitsubishi was a scalp Ghosn added to his belt quite recently. But in November he was suddenly arrested when re-entering Japan on charges of tax fraud. Simultaneously Nissan announced his dismissal. Ghosn is now out on bail.
He claims that the charges against him are the result of “plot and treason” by Nissan executives who want to block his plans for a full merger between the three firms.
If there’s any truth to Ghosn’s claims, they illustrate how nationally rooted big firms remain even in the era of globalisation. But the affair also unveils the tensions created by the competitive and uncertain environment car firms face.
This is a context where, as the Financial Times put it, “It gets harder and harder to carry marginal plants.” Brexit might tip the balance in favour of closure, but it’s not the main cause.