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Tavares Raises Brexit Temperature With Fierce Rhetoric

Tavares Raises Brexit Temperature With Fierce Rhetoric.

“With a no-deal (Brexit) you are going to destroy the lives of the next generation of people in the U.K. and that’s not fair, so a deal is a must”

As the Brexit deadline of October 31 approaches and the possibility Britain and the European Union (EU) might fail to agree a withdrawal deal looms larger, automotive industry leaders are cranking up the rhetoric, with PSA Group CEO Carlos Tavares saying failure to agree a deal would destroy the lives of the next generation of people in the U.K. 

This after Tavares told the BBC a week ago failure to agree would be like a train-wreck.

PSA Group, Europe’s second biggest carmaker by sales after Volkswagen, owns the French mass market brands Peugeot and Citroen, and bought Opel and Vauxhall a couple of years ago from General Motors. Opel is based in Germany, but Vauxhall only sells in the U.K. and produces cars there for itself and Opel. Vauxhall factories at Ellesmere Port near Liverpool and Luton, north of London, face an uncertain future anyway as they are merged into the PSA organization.

If Britain fails to replicate the free-trade arrangement it has with mainland Europe when it leaves the EU, the future of the Vauxhall factories will be called into question. Other big factories in the U.K owned by Toyota, BMW/Mini, Jaguar Land Rover, and Nissan will also come under pressure if the just-in time supply lines are interrupted.

In an interview with Standard & Poors Global Market Intelligence, Tavares didn’t hold back.

“(U.K. Prime Minister Boris) Johnson and (EU chief negotiator Michel) Barnier, they have to find a solution and that’s all. There is no other way. Anything else will be a disaster for everybody as much for the U.K., as much for my employees, as much for continental Europe,” Tavares said.

Johnson and Barnier met in Luxembourg Monday, along with European Commission President Jean-Claude Juncker.

Kids and grandkids
“When it comes to the environment, we say we are all living dramatic changes in our companies because we don’t want to spoil the lives of our kids and our grandkids. With a no-deal (Brexit) you are going to destroy the lives of the next generation of people in the U.K. and that’s not fair, so a deal is a must,” Tavares said in the interview.

Other automotive industry leaders have been demanding an agreement between Britain and the EU that will allow them to thrive. The industry representative organization in Britain, the Society of Motor Manufacturers and Traders (SMMT), has demanded that if no agreement is possible by October 31, the deadline should be extended for a month or two. PM Johnson has said that Britain will leave the EU on October 31, “no ifs, no buts” because it is now about 3-1/2 years since the referendum vote decided to end the membership. Any further delay is not acceptable, according to Johnson. Britain had been scheduled to leave the EU on March 31, and again the next month.

The SMMT has warned that a no-deal Brexit would hit British production with tariffs, border delays and new red tape.

“Leaving without a deal would be the worst outcome. If it takes an extra couple of months to get that deal, I think the industry would put up with that,” SMMT chief executive Mike Hawes told Reuters at the Frankfurt Auto Show last week.

Best scenario
The best case scenario for the industry would be a free trade deal under which nothing really changes from the current setup. The worst case would be a “hard” Brexit with no formal deal, and Britain reverting to World Trade Organisation (WTO) terms. That would restore a tariff regime, but given around half of Britain’s foreign trade is conducted under WTO rules now, that shouldn’t cause many problems. But manufacturing industry fears that any change to its current free access to imports and exports might disrupt the smooth flow of its just-in-time supply chains.

Britain’s car workers might be consoled by the fact that it is expensive to close an assembly plant, probably just as expensive as building a new one. So carmakers will probably ride out any storm before taking such an expensive decision. Britain’s car exports outside of EU markets are growing quickly, and don’t seem to suffer from having to do business under WTO rules, and are also benefitting from lower prices for their products because of the big fall in the value of sterling induced by the Brexit crisis.


 

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