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Does Nissan U.K. Decision Mean Bluff Was Called?

Does Nissan U.K. Decision Mean Bluff Was Called?

“The huge Sunderland plant is a crucial global manufacturing hub for Nissan and even if its trading position had weakened a bit, moving it elsewhere would have been very difficult to do”

Nissan Motor Co’s decision to build two new SUVs at its British factory shows the company, which had threatened to curb investment in the country if Brexit negotiations undermined its profits, was in a much weaker position than its aggressive attitude suggested.

Nissan announced Thursday it would make the new Qashqai at the Sunderland plant, and the X-Trail too. No details were forthcoming, but both sides insisted there had been no deals.

Nissan and British government comments suggested that far from any big concessions being forthcoming, the company was satisfied with warm words saying everything would be all right.   

Nissan CEO Carlos Ghosn had been a vigorous opponent of Britain voting to leave the European Union. As recently as last month’s Paris Car Show, Ghosn said he wanted compensation if the tariff regime following Britain’s E.U. exit cost Nissan money and warned investment might be cut if conditions weren’t met.

Ghosn met British Prime Minister Theresa May a couple of weeks ago and expressed pleasure in the promises made to him, which weren’t spelt out.

“Following our productive meeting, I am confident the government will continue to ensure the U.K. remains a competitive place to do business,” Ghosn said then.

Some reckoned there had been a reassurance that skilled E.U. workers in the industry would be allowed free movement, or Nissan had received cast-iron guarantees of either a favorable free-trade deal, or compensation if tariffs were imposed.

Ghosn said this in a statement on Thursday.

“The support and assurances of the U.K. government enabled us to decide that the next-generation Qashqai and X-Trail will be produced at Sunderland. I welcome British Prime Minister Theresa May’s commitment to the automotive industry in Britain and to the development of an overall industrial strategy,” Ghosn said.

After the meeting with May, Professor David Bailey of the Aston Business School in Birmingham, England, said the question of whether Nissan would continue making the Qashqai at its Sunderland plant provided the first test of Britain’s attitude to crafting a deal with the E.U. when Britain formerly leaves.

“Obviously Nissan is exploiting the issue to bring pressure on the government. They may be looking at some sort of compensation guarantee if Britain left the Single Market if there were tariff barriers, or maybe the ability to hire skilled workers (from outside the U.K.). Maybe there was agreement on future launch aid support, there’s a whole range of things,” Bailey said.

Nothing given
In the event, it seems no such guarantees were given.

In interviews on BBC Radio’s World at One Thursday, Nissan said it had received assurances that the British government was committed to a competitive auto industry, but there had been no detailed agreement on anything else. A government spokesman refused to concede any concessions had been negotiated.

According to Reuters though quoting a source with knowledge of the matter, the UK government has given Nissan a written commitment of extra support in the event that Brexit reduces the competitiveness of the Sunderland plant, in return for new production investments. In addition to unconditional investment aid, Britain has pledged to offer further relief if the terms of Britain’s exit from the E.U. ended up harming the plant’s performance, this source said.

But this assumes Nissan would have been in a position to significantly erode its manufacturing base in Britain. The huge Sunderland plant is a crucial global manufacturing hub for Nissan and even if its trading position had weakened a bit, moving it elsewhere would have been very difficult to do.

Now for the others
Attention now will turn to the other big foreign car makers in Britain, including Honda, Toyota and BMW’s Mini to see if they are happy to remain. Earlier on Thursday, Toyota said from Tokyo that Britain’s Brexit decision might hurt competitiveness a bit, but it didn’t think that would trigger a production shift.

Britain will start formal proceedings to leave the E.U. before the end of March. 

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