Nissan relocates X-Trail manufacturing plans to Japan amid Brexit turmoil

The UK manufacturing plans were originally announced following a meeting between Prime Minister Theresa May and Nissan CEO Carlos Ghosn in 2016, where Nissan reportedly received “a package of pledges” from May over concerns about Brexit.

More recently, however, the firm warned against a hard Brexit, saying that leaving without a deal would have “serious implications” for Britain’s manufacturing industry, an outcome that looks more plausible considering that a deal has still not been reached and the UK intends to leave the EU by 29 March 2019.

In a letter to workers, Nissan chairman Gianluca de Ficchy admitted that much had changed since 2016.

“At that time they were both planned as ‘traditional’ models, powered by internal combustion engines. X-Trail was already going to be made in Kyushu, but there was a good business case for bringing production to Europe as well.

“Since that time, as you know, the environment for the car industry in Europe has changed dramatically. To meet the changing emissions regulations we’ve had to invest much more in new powertrains for our future models like X-Trail. At the same time, the volume forecasts for X-Trail in Europe have reduced.

“For those reasons, the company has decided to optimise our investments and concentrate production in Kyushu, instead of adding another production site. For the European business, this does not change the fact that X-Trail is - and will continue to be - a crucial model for us.

“Today’s announcement will be interpreted by a lot of people as a decision related to Brexit. We have taken this decision for the business reasons I’ve explained, but clearly the uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.”

The letter continued: “With the UK’s departure from the EU on 29 March getting closer every week, we have a taskforce in place, reporting to me, that is considering all of the possible scenarios and the potential impact on the business.

“As a responsible business with 16,000 employees in the region, I want you to know that we are preparing across all functions, and with our supply chain, for anything that might impact our current business model. When the time comes to initiate any of those plans, we will be ready, and we will communicate with full transparency to all of you.”

Nissan was still investing heavily in the new Juke model and the next-generation Qashqai, said Mr de Ficchy.

“Since they were originally allocated, those two models have also needed a lot of additional investment to meet the new emissions regulations and to electrify their powertrains. The team in the plant still has the full confidence of the company.”

Britain’s business minister Greg Clark said the announcement was a “blow to the sector and the region.” The new X-Trail could have created hundreds of jobs. According to the Sunday Times, ministers are now considering whether to withdraw a £60m package of support for the company.

“This kind of support package to help in areas such as training and skills is typical across the industry. Clearly, we will be reviewing it in the light of this decision,” a government source told the newspaper.

Nissan executive vice president for manufacturing and supply chain management, Hideyuki Sakamoto, said: “A model like X-Trail is manufactured in multiple locations globally and can therefore be re-evaluated based on changes to the business environment.

“As always, Nissan has to make optimal use of its global investments for the benefits of its customers.”

The Sunderland plant, which opened in 1986, employs 7,000 workers, producing around 2,000 cars a day. Other Nissan models built at the site include the Qashqai, Juke, Q30, Note and the zero-emission electric Leaf.

Nissan’s decision follows figures last week showing car production slumped by almost one-tenth last year, leaving the industry on ‘red alert’ amid continued Brexit uncertainty.

Unite officer Steve Bush said: “This is very disappointing news for Sunderland and the North East and reflects the serious challenges facing the entire UK auto sector.

“The Government’s mishandling of the transition away from diesel, allied to the continuing uncertainty around our future trading relationship with the EU, are extremely unhelpful when the sector ought to be focused on preparations for electrification.

Rebecca Long-Bailey, shadow business secretary, said: “This is a blow not only to future investment in Sunderland but also to Britain’s industrial strategy. As Nissan stated, continued Brexit uncertainty is not helping businesses plan for the future. The Government’s chaotic handling of Brexit has been the root cause of business uncertainty.

“There are serious questions that the Government must now answer on Monday, not least what was in the secret Brexit deal it issued to Nissan and why this was no longer good enough.”