Brexit Panic Takes Hold. Auto Industry Urges – Begs? – Negotiators to Avert the Business Killing Worst-Case Scenario

AutoInformed.com on Brexit

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AutoInformed warned you: Ahead of this evening’s Brexit summit, Europe’s auto manufacturers and suppliers through *ACEA have issued an unambiguous warning on the potentially far-reaching impacts of a no-deal scenario on their sector, which would threaten their very business model.

Automobile production plants – be they in the EU27 or the UK – receive and fit millions of parts into vehicles every day. All manufacturers rely on ‘just-in-time’ and ‘just-in-sequence’ delivery and production, without any delays or obstacles. These parts are in constant transit in trucks, arriving as and when they are needed. (Brexit Automaker Winners, Losers – Predictable and Surprising)

Every day 1,100 EU trucks cross the Channel to deliver to car and engine plants in the United Kingdom alone, for example. After Brexit, even short hold-ups at customs will cause massive logistical problems, disrupting the production process and generating significant costs.

“Our members are already making contingency plans and are looking for warehouse spaces to stockpile parts,” stated Erik Jonnaert, Secretary General of the European Automobile Manufacturers’ Association (ACEA), which represents the 15 major Europe-based car, van, truck and bus manufacturers. “However, the space required to stockpile for more than a short time would be absolutely huge – and expensive.”

“Some of our members are also planning a temporary post-Brexit production shutdown. But the harsh fact is that no amount of contingency planning can realistically cover all the gaps left by the UK’s withdrawal from the EU on WTO terms.”

Under WTO rules, a 10% tariff would be applied to all cars traded between the EU and the UK. Jonnaert: “We cannot forget that profit margins in our industry are significantly lower than 10%. At the end of the day, these extra costs will either be passed on to the consumer or will have to be absorbed by the manufacturers.”

“The clock is ticking, but it is not yet too late. That is why we are urging the negotiating teams on both sides to redouble their efforts to successfully conclude a withdrawal deal,” Jonnaert underlined.

Sigrid de Vries, Secretary General, **European Association of Automotive Suppliers (CLEPA): “Everything possible must be done to secure a future exchange of goods, services and people that is frictionless. Automotive components often cross borders several times before the final product reaches the customer, and that includes Channel crossings. Any change in the level of integration of the value chain will have an adverse effect on the competitiveness of individual companies and the sector.”

“Smaller companies, that constitute important building blocks of the supply chain, do not have the internal systems, IT platforms or staff in place to deal with customs declarations, tariff classification, customs valuation, or calculations based on content origin. SMEs will be forced to deal with at least some of these issues if they want to continue to trade and serve their customers, facing additional financial and logistical risks, ” said De Vries.

CLEPA recently surveyed its membership and “the most important feedback to policy makers was: remove uncertainty. It remains crucially important to provide clarity on the future relation with the UK as quickly as possible, starting with a withdrawal agreement so that a cliff-edge scenario can be avoided.”

*ACEA represents the 15 major Europe-based car, van, truck and bus manufacturers: BMW Group, DAF Trucks, Daimler, Fiat Chrysler Automobiles, Ford of Europe, Honda Motor Europe, Hyundai Motor Europe, Iveco, Jaguar Land Rover, PSA Group, Renault Group, Toyota Motor Europe, Volkswagen Group, Volvo Cars, and Volvo Group.

**CLEPA, the European Association of Automotive Suppliers, represents over 3.000 companies supplying state-of-the-art components and innovative technology for safe, smart and sustainable mobility, investing over 20 billion euros yearly in research and development. Automotive suppliers in Europe employ nearly five million people across the continent.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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2 Responses to Brexit Panic Takes Hold. Auto Industry Urges – Begs? – Negotiators to Avert the Business Killing Worst-Case Scenario

  1. The automobile industry of Japan would like to express its respect and appreciation for the great efforts being made by the governments of the United Kingdom and the European Union with the aim of reaching an agreement on the withdrawal of the UK from the EU. Despite those efforts, an agreement has not been reached by the original deadline of October 2018. Apprehension is therefore growing that a “withdrawal without agreement” may become a reality.

    JAMA member companies currently operate 14 production plants and 17 research-and-development and design centers across the EU, including in the UK. In 2017, those plants produced 1.5 million vehicles and 170,000 people were employed, directly or indirectly, in JAMA member companies’ EU-based operations and related activities. Japanese automakers’ contributions to the economy and employment in the UK and the EU position us as stakeholders in the automobile industry in both the UK and Europe. For those contributions to continue, it is necessary that an unimpaired trade environment between the United Kingdom and the European Union be maintained and that the automobile industry’s activities remain predicated on shared standards, including those regulating vehicle certification.

    If no withdrawal agreement is reached and the transition period through December 2020 is consequently not implemented, corporate activities and consumers will be adversely affected by the impacts of suspended production activities resulting from failed just-in-time logistics operations, declines in revenue, and revised vehicle sales prices caused by spiralling logistics and production costs. We hope that both the UK and EU governments will continue to make maximum efforts to reach a satisfactory settlement and that a “withdrawal without agreement” is avoided at all costs.

    We also ask that flexible responses be implemented to ensure a smooth transition for all relevant systems following the UK’s withdrawal, enabling minimal impacts on business activities.As corporate residents of the United Kingdom and the European Union, JAMA member companies will make every effort to continue to contribute to economic growth through their local operations.

  2. Mayor of London says:

    Mayor of London on the EU Summit

    The Mayor of London, Sadiq Khan, said: “This summit was supposed to be the final chance to agree a Brexit deal – but due to the appalling incompetence and infighting of Theresa May’s Government there is still a huge risk of no deal at all.

    “After two chaotic years, the Prime Minister can’t even agree a Brexit position within her own party, let alone with the EU.

    “The options on the table are now limited to Theresa May’s proposed bad deal for Britain or no deal at all – both of which would be disastrous for London’s economy and would limit opportunities for the next generation.

    “I held regular meetings with former Brexit secretary David Davis and have reached out to his successor Dominic Raab to discuss London’s needs in the Brexit negotiations. Extremely disappointingly and despite being in the role for three months, he has so far failed to meet me.

    “The ongoing chaos, infighting and ineptitude shows exactly why it’s so crucial that the British public get the opportunity to have their say on the final deal – which is what thousands of people will call for this weekend as they march through the streets of London.”

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