Car Makers Play Dangerous Game Interfering In British Politics.
Toyota Jumps In But Says Nothing’s Changed
Britain will decide in June whether to leave the European Union, and some car manufacturers are playing a dangerous game trying to influence the outcome.
By failing to realize the decision is probably more political than economic, aggressive car makers risk alienating customers and undermining their businesses. The referendum for many is about who governs the country; unelected, faceless bureaucrats in Brussels, or Britain’s centuries old, accountable Parliament.
Smart manufacturers like GM, which owns Opel-Vauxhall, Aston Martin, Jaguar Land Rover, Peugeot-Citroen of France, Japan’s Honda and Volkswagen’s Bentley have said they will happily abide by the decision whether “in” or “out.”
Volkswagen has said nothing, either way.
Toyota of Japan, which made almost 180,000 cars in Britain at its Midlands factory in 2014, has appeared untroubled by the prospect of “Brexit”, the shorthand now used across the media here to talk about leaving the E.U., and deigned to express a view. Until yesterday, that is.
“We respect that the U.K.’s future relationship with the European Union is a matter for the British people to decide, and it is not our intention to participate in the campaign,” said Johan van Zyl, President and CEO of Toyota Motor Europe.
But the rest of the statement added a sting in the tail.
“We have carefully considered the implications for our manufacturing operations, should the U.K. leave the European Union. We are committed to our people and investments, so we are concerned that leaving would create additional business challenges. As a result we believe continued British membership of the E.U. is best for our operations and their long term competitiveness,” van Zyl said.
Toyota insists that this isn’t really a change, but the claim that British membership is the best result surely can’t be interpreted any other way than being against Brexit.
BMW wants Britain to stay in the E.U., and Ford reiterated its belief that Britain should remain. Meanwhile Mercedes parent Daimler and Renault-Nissan have joined in the chorus for the status quo.
Yesterday, according to Bloomberg, Ford Motor Co CEO Mark Fields had this to say.
“It’s really important for the U.K. to be part of a (E.U.) single market and that having the U.K. as part of a reformed E.U. is in the best interests of the U.K.,” Fields was quoted as saying.
This is a dangerous game because the decision on June 23 will not just be about economics, it is a potent political decision that foreigners, particularly Americans with an admired form of open government and democratic accountability, should only involve themselves after some thought.
This is because the issue of membership of the E.U. dates back to a decision in the early 1970s when Britain joined. In 1975, a referendum was held. During this campaign, it was declared that the Common Market, shortly to become the European Economic Community, was purely a free trade area, like NAFTA. There were no implications for Britain’s political independence at all. None. And yet 40 odd years later between 60 per cent and 80 per cent (depending on who you talk to) of legislation affecting Britain comes from the E.U. , bypassing Parliament. Britain’s justice system now ends in Europe. Regulation and red tape drive small businesses to distraction.
Would Americans accept that? This is the equivalent of waking up one day in Washington, D.C, and finding that NAFTA now had a veto over Congress.
Bloomberg also quoted Daimler chief financial officer Bodo Uebber as saying he was “in favour of the European ideal and the bigger it is, the better.”
That is all very well for a multinational corporation which, in a perfect world, would have no national barriers at all, and a single tax and regulatory system across the world. But many people in Britain don’t want to be governed by bureaucrats in Brussels setting laws and raising taxes without political accountability.
As for the argument that Britain will suffer if it was outside the single market, many remember a similar issue in 2002 when Britain was on the verge of joining the “euro” single currency. Car manufacturing chiefs then were almost unanimous in claiming that Britain faced a bleak economic future if it didn’t sign up. Failure to join would mean car makers leaving the country on mass. But since deciding not to join, the euro has virtually bankrupted much of southern Europe, while Britain’s economy and auto industry outside the currency has thrived.
Also, fear-mongering that British trade outside the E.U. would somehow be mortally damaged doesn’t stand up to examination.
In a report today, Morgan Stanley points out that if trade barriers were erected, mainland European exporters to Britain would suffer a huge financial penalty.
“However, from an automotive market perspective, Europe has as much if not more to lose than to gain from its access to the rich and large U.K. market, with over 30 billion euros ($33 billion) in annual export sales, and potentially three to four billion ($3.3 billion-$4.4 billion) in U.K. earnings,” Morgan Stanley said.
Morgan Stanley said German manufacturers sell over 650,000 vehicles in the U.K. a year, while premium manufacturers sell 450,000 vehicles worth almost $22 billion a year.
Michael Burrage, analyst with Cimigo, said this last year.
“In the event of leaving, the U.K. government will negotiate free trade with everyone, and the interests of the motor industry, and the finance sector will be priorities one and two. As a matter of fact, the motor industry will also be number one for the Germans. It is inconceivable that they would allow the other E.U. members to impose a tariff on U.K. based manufacturers, knowing that the U.K., a very important market for all of them, could replay with an equivalent,” he said.
In other words, car manufacturers should cool it. Trade will carry on as if nothing had happened, and joining a political campaign that might irritate the locals is not a great way to build your business long-term.