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X-Trail Decision Raises Questions About Government Funding

X-Trail Decision Raises Questions About Government Funding.

Brexit Peripheral.

Nissan of Japan’s decision to reverse its plan to make the new version of its X-Trail SUV at its British plant was taken because of Europe’s sudden rejection of diesel engines, and weakening sales in the region generally.

But the decision became headlines in Britain because some politicians linked the move with the March 29 deadline for Britain to leave the European Union (EU).

In a letter to workers at its Sunderland plant, Nissan explained that it decided not to build the X-Trail in Britain because the market environment for the car industry had changed dramatically, including EU regulations on diesel emissions. Brexit was seen as an irritating detail, rather than crucial to the decision. Nissan will now have to redesign the X-Trail to incorporate more frugal gasoline engines, or offer gasoline electric hybrid versions. Production of the big selling Nissan Qashqai and Nissan Juke will continue at the plant.

But the impact of the decision took a more serious step for Nissan when the Financial Times newspaper revealed that the British government had promised the company about 80 million pounds ($104 million) in return for setting up the new X-Trail production, and retaining the Qashqai and Juke.

Questions will be asked in Parliament later Monday to find out if any of this money was paid to Nissan. 

In a letter from British government business minister Greg Clark to then Nissan CEO Carlos Ghosn, the government also promised to protect the car sector as Britain leaves the EU.

“It will be a critical priority of our negotiations to support UK car manufacturers, and ensure their ability to export to and from the EU is not adversely affected by the UK’s future relationship with the EU,” the letter read, according to the FT.

“In any circumstance, the government will ensure that the UK continues to be one of the most competitive locations for automotive and other advanced manufacturing within Europe and globally, including sites such as Sunderland,” the letter said.

Nissan, part of the alliance with Renault of France and Mitsubishi Motors of Japan, has come under pressure since Ghosn was arrested in Japan and charged with hiding part of his compensation to avoid tax. Ghosn says is innocent. The future of the alliance is now in the balance.

Renault owns 43% of Nissan, which has a non-voting 15% stake in Renault. France owns 15% of Renault.


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