Published on February 19th, 2019 | by Steve Hanley0
Honda To Close Swindon Factory In 2021. Is Brexit Or The Switch To Electric Cars To Blame?
February 19th, 2019 by Steve Hanley
A February 19 press release from Honda UK says the company will close its Swindon factory by the end of 2021. That facility builds about 150,000 Honda Civic vehicles a year, which are distributed throughout the UK and Europe. The first reaction of many people has been that the chaos surrounding Brexit is responsible for the decision, but the statement from the company makes no mention of that tumultuous topic. Instead, it hints that the accelerating shift in the auto business toward electric vehicles is the primary reason for the closure.
Honda of the UK Manufacturing (HUM) has today informed associates (employees) of the proposal to close its Swindon vehicle manufacturing plant, at the end of the current model’s production lifecycle, in 2021. The plant currently produces 150,000 cars per year, and employs circa 3,500 associates.
This proposal comes as Honda accelerates its commitment to electrified cars, in response to the unprecedented changes in the global automotive industry. 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. Under this proposed restructure, HUM’s current role as a global manufacturing hub may no longer be viable.
Consultation activity will begin today, and HUM will be working closely with its workforce, including the recognised trade union, Unite the Union, over the months ahead.
Katsushi Inoue, Chief Officer for European Regional Operations, Honda Motor Co., Ltd., and President, Honda Motor Europe said; “In light of the unprecedented changes that are affecting our industry, it is vital that we accelerate our electrification strategy and restructure our global operations accordingly. As a result, we have had to take this difficult decision to consult our workforce on how we might prepare our manufacturing network for the future. This has not been taken lightly and we deeply regret how unsettling today’s announcement will be for our people.”
HUM Director, Jason Smith, said; “We understand the impact this proposal will have on our associates, wider supplier base and the local community. We are committed to supporting associates to help them through this difficult time.
For every factory job, there are a similar number of jobs outside the factory in industries that supply and support manufacturing. In another statement reported by Yahoo, the company says, “A further 3,500 people may be affected when we take into account other Honda businesses … that provide parts supply, logistics, and support to the Swindon factory.” The jobs are within Honda subsidiaries and “affiliated companies,” the statement said.
“All of that is taking a huge amount of resource out of car companies,” Peter Wells, a professor at the Center for Automotive Industry Research (CAIR) at Cardiff Business School, tells the New York Times. “They’ve got to access those new markets, restructure their operations; it’s an enormous burden financially. It’s putting strain on the whole sector. It’s all going on around this industry and it’s proving to be a turbulent strategic time for the participants,” he says.
Despite the company’s insistence that Brexit has nothing to do with the decision to close the Swindon facility, others are not so sure. “I have listened to several Honda senior executives [at a recent industry event] saying that membership of the [EU] customs union was needed for them to operate in the UK … This should not come as a surprise to anyone who took the industry warnings seriously,” Oxford professor Matthias Holweg tells Yahoo.
He adds that Japan and the UK recently concluded a new free trade agreement that makes it less expensive for Japanese companies to manufacture cars at home and ship them to foreign markets. Nissan has also decided recently to build its new X Trail model in Japan rather than at its factory in Sunderland where it builds the LEAF for UK and European customers.
It’s hard to see how Brexit could not be an issue. About 40% of the components that Honda uses at the Swindon factory come from the European Union, claims the New York Times. 35% of its exports are sent to the European region, according to Patrick Keating, the government affairs manager at Honda Motor Europe. He told a parliamentary committee in 2017 that Honda had “about 2 million components a day coming in on 350 trucks” from Europe.
It’s difficult to give full credence to the claim that the changeover to electric vehicles is behind the Swindon factory closing, especially for Honda, which has shown little appetite for fully electric cars to date other than an Urban EV thatt is supposed to debut in near-production form in Geneva in a few weeks. The elephant in the room is China, where electric vehicles are all but mandated now and where the prospect for growth in sales is nearly limitless.
Maybe what the Honda announcement means more than anything is that all eyes in the auto industry are turning to China as emissions regulations in Europe get tighter and manufacturers continue to scratch and claw for sales in a market that is nearly saturated. GM sold its European assets in 2017. Ford of Europe has had nothing but losses to show for its efforts in recent years. In the US, Ford and GM are closing car factories and laying off workers in an effort to ward off oceans of red ink.
Perhaps the news about the Swindon factory closure isn’t about Brexit or electric cars at all. Maybe it’s about the world of auto manufacturing fracturing along new fault lines. Tesla may be driving the engine of change but there’s plenty of new trends in the industry. What is likely is that in ten years we will see a total realignment of the industry, one that we can only guess at today.