Honda says UK plant closure not Brexit related

TOKYO – Honda plans to close its Swindon assembly plant in England in 2021 as the automaker pushes toward electrification and confronts changing trends in trade relations.

The global restructuring move comes amid uncertainty about Britain’s so-called Brexit withdrawal from the European Union and the implementation of a new free trade pact between Europe and Japan.

Honda CEO Takahiro Hachigo announced the move Tuesday at the company’s global headquarters in Tokyo.

The closure has nothing to do with Brexit and the decision was timed to the end of the end of the current Civic’s lifecycle, Hachigo said.

The plant, opened in 1985, currently builds the Civic five-door hatchback for global markets including Europe and the U.S. It employs 3,500 people and produces about 150,000 vehicles a year. The factory has operated at less than full capacity in recent years as demand in Europe slumped, prompting Honda to suspend a production line with a capacity of 100,000 units in 2014.

With the start of the next-generation Civic, other regions will pick up the output that came from Swindon, Honda said. This includes a bigger share for Honda’s North American plants.

Honda’s European headquarters will remain in the UK, Honda said.

Honda will also stop making the Civic sedan at its plant in Turkey in 2021, although it plans to continue its operations in that country, Hachigo said.

As part of the realignment, Honda said it will commonize the European lineup with the brand’s offerings in China, where environmental standards put similar demands on emissions.

The UK has long been a Japanese hub for European auto production, with Honda, Nissan and Toyota owning three of the country’s six largest carmaking factories. That has quickly unraveled, with Nissan this month reneging on plans to build the X-Trail SUV in Sunderland — partly due to the unresolved status of EU-UK trade after Brexit.

EU-Japan deal

UK-built products also risk being disadvantaged by a new treaty that will gradually eliminate tariffs on Japanese imports to the EU.

The EU-Japan Economic Partnership Agreement, in force since Feb. 1, ensures that the bloc’s 10 percent tariff on Japanese car imports will be reduced to zero over the next 10 years.

The treaty makes it easier for Japanese automakers to localize production at home for sale in the EU, consulting firm LMC Automotive said in a report this month. The UK is most at risk because almost half of the cars made in the country are Japanese branded, and Japanese automakers want to increase utilization of plants at home.

“Should Britain leave without a deal and WTO tariffs are applied to UK vehicle exports, the same cars made in Japan may well end up costing less to import into the EU than those produced just over the Channel in England,” LMC’s director of global production forecast, Justin Cox, said in the Feb. 11 report.

The UK auto industry has already been battling Brexit-related slowdown, potential tariffs and supply bottlenecks ahead of the exit from the EU on March 29. UK lawmakers have yet to find a solution to avert a no-deal split from the EU.

Ford Motor announced thousands of job cuts in Europe last week and  said a hard Brexit would be “ catastrophic” for the UK auto industry and its own engine-production facilities in the country. Jaguar Land Rover, Britain’s biggest automaker, said in January it would scrap 4,500 positions in response to a sales slowdown blamed on reasons including Brexit. PSA Group’s Vauxhall Ellesmere Port site is in doubt as it mulls plans for the next Astra.

As the political impasse over Brexit drags on, investments in the British automotive industry nearly halved last year to 589 million pounds ($760 million), the lowest since the global financial crisis, according to the Society of Motor Manufacturers.

EV shift

Honda is revamping its global production footprint as it tries to tackle overcapacity at Japanese factories and the need to produce more electrified vehicles to meet more stringent emissions standards. Honda wants to get two-thirds of global sales from electrified vehicles by 2030.

“The significant challenges of electrification will see Honda revise its global manufacturing operations, and focus activity in regions where it expects to have high production volumes,” Honda said in a release. “The restructure comes as Honda its commitment to electrified cars.”

In October 2017, Honda said it would take the rare step of shuttering a Japanese assembly plant as it shifts manufacturing know-how toward electrified cars.

It said the aging Sayama assembly plant would wind down by March 31, 2022 and consolidate operations around the nearby Yorii plant, one of the automaker’s newest.

Yorii, which opened in 2013, will be positioned as a worldwide center for developing cutting-edge manufacturing technologies as well as techniques for producing electrified vehicles.

As part of the changes, Honda said it will also appoint a chairman to the currently vacant position. Toshiaki Mikoshiba, who currently oversees global sales and marketing as well as North American operations, will take the chairman’s role.

Reuters and Bloomberg contributed to this report