Honda and other carmakers warn of 'semi-catastrophic' U.K. output halts after Brexit

Anti-Brexit protesters wave flags and a placard outside the Houses of Parliament in London Tuesday. | REUTERS

Bloomberg

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Nov 15, 2017

LONDON – Carmakers in the U.K. could endure “semi-catastrophic” production interruptions if the European Union stops automatically accepting the nation’s vehicle certification program once Brexit comes into effect, executives told British lawmakers.

Terms for Britain’s departure from the EU will need to include agreements on so-called type approvals for U.K.-made autos so they can still be sold in the bloc’s remaining countries, Patrick Keating, Honda Motor Co.’s government affairs manager in Europe, told Parliament’s business, energy and industrial strategy committee in London on Tuesday.

EU regulators have indicated that approvals from the U.K. Vehicle Certification Authority “will either no longer hold validity, or not be able to be extended,” and Honda may have to look elsewhere for its European regulatory base for British-made cars, Keating said.

Vehicles can only hold certification from one European location at a time, so if type approval in one country is no longer accepted, the manufacturer must go through the process of applying elsewhere for another, potentially forcing factory shutdowns until the paperwork is resolved, Society of Motor Manufacturers and Traders Chief Executive Officer Mike Hawes said.

Auto manufacturers with plants in Britain, including Honda and Toyota Motor Corp. and Munich-based BMW AG, have been pushing U.K. authorities to ensure vehicles and components can continue to enter and leave the country with minimal trade barriers once EU ties end. French carmaker PSA Group said last week that the U.K. plants it acquired when buying General Motors Co.’s European operations will need to make a leap in competitiveness to offset risks from Brexit.

“Without VCA type approval, it really is quite a stark picture for us,” with the potential for a “semi-catastrophic” halt to manufacturing, Aston Martin Lagonda Ltd. Chief Financial Officer Mark Wilson told the committee, because the Gaydon, England-based luxury-vehicle maker produces cars exclusively in the U.K.

Keating told the committee that Honda needs clarity by March 2018 on the trade framework because of the roughly yearlong lead times needed to prepare for the U.K.’s exit from the bloc in April 2019. The carmaker is looking at “increasing the amount of warehousing and the amount of stock that we’d have to hold if friction entered the border” with the EU, he said.