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Honda to shutter UK plant and halt Turkish manufacturing in 2021

Company president says Brexit affects production, but not factor in closures

Honda Civic hatchbacks await export from the U.K. The Japanese automaker's sole European auto plant, in Swindon, has been operating below capacity amid faltering sales.
The Japanese automaker's sole European auto plant, in Swindon, has been operating below capacity amid faltering sales.   © AP

TOKYO/FRANKFURT -- Honda Motor said on Tuesday it will close its U.K. factory in 2021, withdrawing from European auto production altogether, as London's looming exit from the unified market looks set to compound its troubles on the Continent.

The plant in Swindon, west of London, manufactured about 160,000 vehicles in 2018, including the automaker's mainstay Civic -- far below the output capacity of 250,000. The company also plans to halt production of its Civic model at its Turkish factory in 2021, Honda President Takahiro Hachigo said at a news conference.

"The decision has nothing to do with Brexit," Hachigo said in Tokyo. "We were examining the production site for the next model of the Civic and made the decision after taking environmental standards in the U.S. and Europe into account."

The 3,500 workers will be laid off. The company's European sales of four-wheel vehicles have fallen to just over 100,000 units annually, for a market share of around 1%, putting it below compatriots like Mazda Motor and Suzuki Motor.

"We will begin discussion with our employees in the U.K. factory today. We would like to do as much for them as possible," said Hachigo.

The U.K. said it was deeply disappointed by Honda's decision. "The U.K. is one of the leaders in the development of these technologies, and so it is deeply disappointing that this decision has been taken now," U.K. Business Secretary Greg Clark said.

The prospect of Brexit, scheduled for March 29, added yet more uncertainty to a business already mired in red ink. While peer automakers are planning more moderate measures such as temporary stoppages in light of Brexit-linked uncertainty, Honda plans to go a step further by shutting down its only production site in Europe.

Honda suspended one of the Swindon plant's two lines in 2014 and has focused on churning out Civics for such markets as Japan and the U.S. The automaker had been searching for a way to keep its European production framework in place post-Brexit.

The plan had been to start producing new Civic models at the U.K. factory from the early 2020s. But as the prospects of a no-deal Brexit grew, Britain's viability as an export base became less certain. By closing the factory, Honda aims to improve earnings in its European operations.

A no-deal divorce from the market would instantly impose a 10% tariff on cars traded between the U.K. and the Continent, and customs clearance would once again become necessary, throwing intricate supply chains into disarray. For ultimate production efficiency, auto plants in the U.K. now store enough parts for just hours of production. More than a thousand trucks a day cross the Dover Strait.

Honda will maintain its European headquarters, Honda Motor Europe, in the U.K. after Brexit. While denying that Brexit is a factor in the latest decision, Hachigo acknowledged that it is creating uncertainty for the company's U.K. production. "The biggest risk is a disruption in parts supply," he said.

"Current circumstances do not allow us to make a decision involving a big investment," a top official at a major automaker lamented.

Worries have driven Nissan Motor to scrap plans for producing the next model for a mainstay sport utility vehicle at a British facility.

Toyota Motor is considering a temporary halt to factory work in the event of a no-deal Brexit. The company ships roughly 90% of vehicles produced in the U.K. to Europe, while the figure is roughly 60% for Nissan, according to LMC Automotive.

BMW may shift a portion of output at an Oxford plant to the Netherlands, and media reports say Ford Motor is weighing ending engine production in the U.K.

Toyota had previously warned it could be forced to suspend production in the U.K. if the country leaves the European Union with no agreement on the terms of its departure. The company's Burnaston plant in central England, which produced 130,000 vehicles last year, uses 150 trucks' worth of parts per day, a third of which comes from continental Europe.

Those shipments would likely be subject to tariffs and customs checks in the event of a no-deal Brexit. Toyota plants stock only a few hours' worth of parts at a time, so a delay in shipments could impact production. Toyota's executives have said a no-deal Brexit should be avoided at all costs.

EU duties on Toyota's U.K.-produced vehicles could lead the company to reassess its position in the country.

A lack of competitiveness can create a situation where Toyota will "very seriously need to look at business and future investments," Toyota Motor Europe President and CEO Johan van Zyl said last year.

Other international companies, including Japanese electronics makers Panasonic and Sony, plan to relocate certain British operations to the Continent.

Nikkei staff writer Mitsuru Obe contributed to this article.

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