Brexit puts Nissan’s UK future at risk but many car industry workers still want to leave EU
‘The majority of those on the shop floor want to leave; those who are faced with managing global businesses take a different view,’ says Mike Matthews, who worked his way up from an apprenticeship to become managing director of a key Nissan supplier
Few people have witnessed the transformational effect that Nissan has had on the northeast of England over the past three decades like Mike Matthews has. And few can have more first-hand experience of the danger posed to that progress by Brexit.
This week, Nissan U-turned on its decision to build the new X-Trail at its Sunderland plant. For Matthews, who worked his way up from an apprenticeship to become managing director at a key Nissan supplier, it hit close to home.
A £61m package of taxpayer-funded sweeteners offered to Nissan by the government proved not to be enough to counter the financial reality of investing in post-Brexit Britain, the shape of which remains deeply uncertain. Despite its earlier assurances, the company crunched the numbers and decided it now made sense to build its new model in Japan instead.
“I’m so disappointed for the plant,” says Matthews. “It’s such a pity.”
Raised in Darlington, Matthews describes himself as a “manufacturing guy through and through” with more than 30 years’ experience in the car industry.
A toolmaker by trade, he is also one of the northeast’s most prominent business leaders, awarded an MBE in 2014 for the many years he has spent promoting the region.
Before his resignation last month, he held the top job at Nifco, which designs and builds plastics components, and relies on Nissan for a quarter of its UK sales.
In his view, the type of Brexit currently being pursued by Theresa May’s government damages the prospects not just for the UK’s biggest and most productive car factory but also the futures of tens of thousands of young people.
“Nissan is such a fantastic organisation,” says Matthews. “What you don’t often hear about is the tens of thousands of people that Nissan has trained who have moved on and helped to build other companies.
“As well as a car plant, they have become a talent factory. We need more companies like that in the UK because one of our biggest problems is a lack of skills. It is such a massive issue.”
Matthews is a clear example of how the talent factory spreads opportunities far beyond Nissan’s walls and all along the sprawling supply chain down to smaller firms that support close to 40,000 jobs between them.
His own career has grown alongside Nissan’s presence in Sunderland, a city that is home to some of the UK’s most deprived areas. His apprenticeship at Nifco began shortly after Nissan opened up its UK plant to great fanfare in 1986.
Back then, Nissan had grown rapidly in its home market and sought to export the Japanese car industry’s hyper-efficient, just-in-time manufacturing model to Europe. Now that process is in danger of going into reverse.
The Sunderland plant built 5,000 cars in its first year and employed 500 people. With the new X-Trail, that was to have grown to more than 600,000 cars and more than 7,000 employees. Sunderland was to have become, in Nissan’s words, a “super-plant”.
The X-Trail decision may make little long-term difference to Nissan, which has plants all over the world. But its smaller suppliers across the northeast will forgo future growth; much-needed jobs will not be created; money will not be invested.
No one will lose their jobs as a direct result of this decision but it provides a clue to the behaviour of international car companies post-Brexit.
Car models have their natural life-cycle which is likely to be several years, explains Richard Wilding, professor of supply chain strategy at Cranfield School of Management. Towards the end of these cycles decisions are made about the production of the next iteration.
He points out that more investment decisions will be made as models reach the end of their lives, meaning that the full impact of Brexit on manufacturing will not be known for some time. At this point it is simple enough for a global company to choose one of its other sites.
Japan’s freshly inked free trade deal with the EU means that by 2027 its car exports into the world’s largest single market will face zero tariffs compared to the 10 per cent the UK will face.
Nissan is not alone. Jaguar Land Rover last year announced it would transfer production of the Discovery from the West Midlands to Slovakia, which, being inside the EU, has tariff-free access.
Just as opportunity cascades down the supply chain so does the negative impact of decisions like these, a fact which Matthews is keenly aware of. It’s been more than two years since Nissan announced it would make the X-Trail in Sunderland and many companies will have built their businesses and their sales forecasts around the decision, he says.
“Now they will have gaps in their manufacturing that they have to fill somehow, which will be a huge challenge. They will have to look to other manufacturers.”
That will of course prove difficult as other firms, including JLR and Ford, have scaled back their workforces in the UK amid continuing uncertainty not just around Brexit but diesel emissions too.
Going the other way up the supply chain, the Port of Tyne’s chief executive Matthew Beeton is concerned by Nissan’s decision. The lack of clarity around Brexit means it “remains difficult to plan and invest for in the medium to long term – impacting on ... ports, business and indeed the wider economic position both regionally and nationally”, he said.
Despite the risks, Matthews understands why many shop floor workers still want to leave the EU and he insists that the UK’s decision to do so must be respected.
“I’ve spoken to a lot of people on the shop floor. Many of them want to come out of the EU regardless.
“They are very frustrated with our relationship with Europe. The majority of those on the shop floor want to leave.
“The people who are faced with managing global businesses take a different view.”
He blames the EU for the current lack of certainty on Brexit as much as the UK government.
“I voted remain and I have been very open about that but I also respect democracy. To protect manufacturing we need some form of customs union, but not at any cost.
“The way we have been treated by the EU in the negotiations has led to an increase in nationalist tendencies that is causing big rifts that will still be here 10, 20, 30 years down the line.”
In the more immediate term, Brexit is due to go ahead next month and manufacturers are still a long way short of being ready.
“How can you prepare when you don’t know what you are preparing for? We are coming out in a matter of weeks and we still don’t know.”
The kind of just-in-time manufacturing operated by the UK car industry requires companies having stock on hand, Matthews explains. “But companies don’t know the lead times that they’re going to face after Brexit.
“How can any business plan for that? It is a nightmare.”
A lot of firms are building up stocks as much as they can to prepare for no deal but the other side of that is they spend a huge amount of money on warehousing which may have been wasted, says Matthews.
With all of these problems to face, will other manufacturers follow Nissan and JLR by starting to shift production of certain models elsewhere?
Matthews won’t be drawn.
“If we come out of the EU and secure some kind of customs union that will be very good news for UK manufacturing,” says Matthews. “But I don’t have a crystal ball.”