The UK’s auto industry is worth over $100 billion, and things are about to get messy with a Brexit deal up in the air, and now Ford Motors is predicting that it could cost it up to $1 billion a year, Reuters reports.
It’s time for a damage-control contingency plan, and fast because Britain is slated to exit the European Union in only 63.
Last week, British PM Theresa May’s Brexit deal lost by a huge margin and though her government survived a no-confidence vote, what comes next is the high seas of uncertainty—but still a glimmer of hope that may there won’t be a Brexit at all.
But if it ends up being a no-deal Brexit, Ford is on the line. It’s the top-selling car brand in Britain, and will face trade delays at the border, a weaker economic outlook and even tariffs on trade with the EU.
Ford’s CFO, Bob Shanks, told reporters last week that a no-deal Brexit was unlikely, but if it happened, it would be “catastrophic”.
“We clearly have already started to work on the eventuality of there being a hard Brexit…We're actually incurring costs, doing things now to prepare for that, so there will be an impact…, We're certainly hoping that does not happen, but we can't wait,” Shanks said.
Ford employs 53,000 people in Europe, some 13,000 are in the UK. Earlier this month, Ford said it would cut thousands of jobs and was considering plant closures in Europe.
The rest of the auto industry isn’t likely to slide by unharmed, either. A recent survey by the UK Society of Motor Manufacturers and Traders found that 74 percent of auto industry members said a no-deal Brexit would damage their business. Another 20 percent said they have already lost business because of the uncertainty. The industry employs over 1 million people in the UK. Related: Americans Are Not Ready For A Recession
Ford is already losing money in Europe. In fact, based on its Q4 results, it’s losing money in every overseas market. Ford posted a Q4 net loss of $116 million or 3 cents a share, down from a net profit of $2.5 billion or 63 cents a share in Q4 2017, which it attributed largely to one-time pension costs and other charges. Through the third quarter of 2018, Ford had lost $119 million in Europe.
Ford’s Brexit announcement came as Jaguar Land Rover informed its employees that it will shut down its four main factories for an extra week at the start of April on top of previously planned maintenance pause because of "potential Brexit disruption".
BMW is already planning to close its plant near Oxford for a month after Brexit, while Honda is planning a six-day closure saying that no-deal Brexit would cost it tens of millions of pounds in additional tariffs. Toyota waned that “no deal” scenario could cost it $13 million a day – and that it was shifting some work to Belgium.
Also, Airbus, which makes aircraft wings in the UK, warned it could shift manufacturing from the UK in the event of no deal.
In the meantime, the UK auto market lost 7 percent through 2018, and while Brexit isn’t its only problem, the UK Spectator magazine raises the question: “Will any foreign car maker build a new factory in the UK in the next 20 years? I very much doubt it.”
By David Craggen for Safehaven.com
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