When Honda Motor Co. opened a car plant in Swindon, England, in 1989, the company said it would be the cornerstone of its European operations.
Over the years, Honda sank more than £2.2-billion ($3.8-billion) into the plant and today it churns out 160,000 Civics and CR-Vs annually, mainly for the European market. Even as the uncertainty over Brexit increased after the 2016 referendum, Honda insisted it was committed to Britain and British workers.
Everything changed on Feb. 19. Honda announced that the plant would close in 2021, throwing 3,500 people out of work and affecting another 10,000 jobs at suppliers across the small city 130 kilometres west of London. Company executives blamed changing dynamics in the auto industry and a need to restructure globally. And they insisted it had nothing to do with Britain leaving the European Union, something people in Swindon find hard to swallow.
“I don’t believe them,” said Patrick Brennan, who has worked at the plant for 25 years, installing engines and front suspensions. He’s the shop steward for the Unite union, which represents the plant’s workers, and he’d been reassured repeatedly by Honda that the plant was not at risk. It wasn’t lost on him, or anyone else in Swindon, that Honda’s announcement came days after a trade deal between Japan and the European Union came into effect. That deal will slash EU tariffs on Japanese-made cars to zero, giving Honda little incentive to keep building cars in Britain, which will face EU tariffs of up to 10 per cent after Brexit. Instead, Honda is expected to move U.K. production back to Japan. The decision to close the Swindon plant “wasn’t just a shock, that’s putting it too mild, it was an absolute betrayal, to be honest with you,” Mr. Brennan said. “Brexit is not helping anybody, never mind just Honda. It’s not helping anybody.”
There’s little doubt that the Brexit chaos has had an impact on the British economy, and there’s growing concern that the Swindon plant could be just the start of what’s to come. Business investment across the country has fallen to a decade low and overall confidence in the economy has been rattled. And there’s no end in sight to the Brexit turmoil. Prime Minister Theresa May has been unable to ratify a withdrawal agreement with the EU and on Wednesday she’ll ask EU leaders to delay Britain’s departure, which is supposed to happen on Friday at 11 p.m. Ms. May met French President Emmanuel Macron and German Chancellor Angela Merkel on Tuesday and both made it clear any extension could last months if not years.
Automakers have been hit particularly hard by the uncertainty. Nissan Motor Co. recently pulled production of a new sport utility vehicle from its plant in Sunderland, while Ford Motor Co. has said that it’s reviewing all its U.K. operations because of Brexit. Jaguar Land Rover has also cut 4,500 jobs, mainly in Britain, and it plans to move some production to Slovakia to stay within the EU.
“Companies can’t wait forever. They have to make investments and if the U.K. is in a position where it’s unclear, or unstable, then it’s a reason not to invest in the U.K.,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders. Last week the SMMT said the Brexit upheaval had also affected car sales, which fell 2.4 per cent in the first quarter of 2019 compared with a year ago.
Andy Palmer, CEO of luxury car maker Aston Martin Lagonda Global Holdings PLC, said his company has been scrambling for months to prepare for Brexit. Aston Martin relies on suppliers from Europe and the company is worried about long delays at the border after Britain leaves the EU. "You can’t make cars on a just-in-time basis if you haven’t got your bits, and getting your bits through Dover or Calais, particularly at the start of a no-deal Brexit, is of concern,” he told reporters at a recent industry conference. He added that the company has been stockpiling parts and finding new supply lines. It’s also been shifting to British suppliers in an attempt to meet potential content requirements in any post-Brexit trade deal with the EU. Mr. Palmer expects British goods will need to have 55 per cent U.K. content in order to qualify for reduced EU tariffs. “Since the vote [to leave the EU] was taken more than two years ago, we’ve now increased our U.K. content beyond 55 per cent,” he said. “But all of this is unwelcome.”
People in Swindon are hoping Honda can be persuaded to reverse its decision and hundreds of workers joined a rally last week to save the plant. The company is the third-largest employer in Swindon, a city of 220,000 people who voted 55 per cent to leave the EU in 2016. “It’s certainly a big blow,” lead city councillor David Renard said. He still supports Brexit and says he believes there were bigger factors in Honda’s decision. “Over time it is something we can recover from, but nevertheless it is a blow for those workers and the economy,” he added.
Back at the plant, Mr. Brennan is less hopeful Honda will relent. “I’m not filled with confidence, if you want my honest opinion,” he said. “This decision is a serious situation for the economy and we’re the ones being thrown out on the grass."