Business / Corporate

Honda to shut sole U.K. plant in Swindon, imperiling 3,500 jobs just weeks ahead of Brexit

Reuters, Staff Report

In the latest blow to the U.K. car industry as Brexit approaches, Honda Motor Co. announced Tuesday it will end production at its only car plant in the country by the end of 2021 — a move that would eliminate 3,500 jobs.

“As we need to boost the product lineup of electric vehicles in Europe, we’ve come to think that it will be difficult to manufacture such vehicles there due to competitiveness and other factors,” Honda CEO Takahiro Hachigo told a news conference at the firm’s headquarters in Tokyo.

As environmental regulations are set to be strengthened in China, where the automaker has several production bases, Hachigo said more environmentally friendly models will be manufactured in China and exported to Europe in the future.

Although the possibility of a “no-deal” Brexit still looms, Hachigo said the company’s decision is not related to that possibility, stressing that it is instead part of a streamlining of production sites and capability. The timing also coincided with the decision to change its Civic production base.

Honda also said it will cease production at its plant in Turkey in 2021, which will result in the loss of 1,100 jobs in that country.

“We will continue our business in the U.K. and Turkey, so we hope to keep building good relationships with both governments,” Hachigo said.

Asked what will happen to the 3,500 workers at its Swindon plant in southern England, Hachigo said Honda will do what it can and that talks between management and employees began Tuesday.

The Swindon decision is the second such move that Honda is planning for 2022. The automaker announced more than a year ago that it will close one of its Japanese plants in an effort to consolidate production as it focuses on new vehicle technologies.

Honda built 160,000 vehicles at the Swindon factory last year, accounting for just over 10 percent of Britain’s total output of 1.52 million cars.

But it has struggled in Europe in recent years, and the industry faces a number of challenges, including declining diesel demand and tougher regulations alongside the uncertainty over the U.K.’s departure from the European Union, due next month.

Justin Tomlinson, a Conservative lawmaker for Swindon who voted for Brexit in 2016, said he had met with the business minister and representatives from Honda who had confirmed the plans.

Honda announced in October 2017 it would stop making vehicles at its Sayama plant in Saitama Prefecture by 2022 as it grapples with a shrinking domestic market.

Like many of its global rivals, Honda is trying to streamline its operations as it invests heavily to develop electric vehicles and self-driving cars, transforming itself from simply a manufacturer of cars into a mobility company.

Japan has repeatedly warned it could pull investments in the U.K., which it had seen as a gateway into Europe, if London does not secure a Brexit deal favorable for trade.

The recently enacted EU-Japan trade agreement means tariffs on cars from Japan to the continent will be eliminated, while the U.K. is struggling to make progress on talks over post-Brexit trade relations with Tokyo.

Honda’s announcement would come just over two weeks after rival Nissan Motor Co. canceled plans to build its X-Trail sport utility vehicle in the U.K.

In January, Britain’s biggest automaker, Jaguar Land Rover, said it would cut 10 percent of its workforce, mainly at home, due to sluggish sales to China and a slump in European diesel demand.

“The car industry in the U.K. over the last two decades has been the jewel in the crown for the manufacturing sector — and now it has been brought low by the chaotic Brexit uncertainty,” said Des Quinn, national officer for the automotive sector at the U.K.’s biggest trade union, Unite.

Honda said last month it would shut its U.K. operations for six days in April to help counter any border disruption from Brexit. It was also preparing to front-load some production at its plant to ship overseas or build up inventories.

Nissan, Honda and Toyota together account for roughly half of the cars built in the U.K.

Honda, which has been building more cars for sale outside of Europe in recent years, had already said earlier this month that its production volumes at Swindon would be reduced to 570 cars per day and that it would make job cuts.

“This reduction in volume will not have any impact on our permanent resource levels, and is in line with our current production plans,” the company had said.