Ford Cannot Form Long Term Plans For UK Biz Due To Brexit Uncertainty

United States car manufacturer Ford is yet to finalize its long term plans on for the United Kingdom and the company is already spending tens of millions of euros as it is preparing for a situation of a no Deal Brexit, said Ford Europe chairman Steven Armstrong on Tuesday.

Armstrong told Reuters news agency at an event in the Netherlands: “We love being in Britain, but it has to be competitive and if it’s not competitive then we’ll have to take whatever actions we’ll need to take to protect the business.”

The company currently manufactures about 1.3 million engines at two British locations, Bridgend and Dagenham, and assembled its cars in Germany. The company had warned earlier of taking a $1 billion hit in tariff costs if there was a hard Brexit.

The company has already announced curtailing of about 5000 jobs at its second largest European market Germany. But the company is yet to decide on such a measure or the UK – its largest European market.

Making measures to hedge currencies and shifting inventory between countries in anticipation of a no deal Brexit, Ford has already cost the company tens of millions of euros, Armstrong said.

Te best case scenario was that money spent preparing for Brexit would be “wasted”, he said.

The ultimate date of the UK leaving the EU has been postponed to April 12 from March 29 or perhaps even much later which has wasted some of the contingency plans that some of the car makers had made.

For example, according to plans that had been made long ago by BMW and Peugeot so to help the car makers to negotiate any disruption from Brexit, the Mini plant of BMW in Britain is closing for four weeks while the Vauxhall car factory of Peugeot will be closed for two weeks.

“We’ve been clear with the government in the UK and also in Brussels, we have to maintain frictionless trade at the borders and tariff-free trade,” said Armstrong.

The confidence that the UK would be able to maintain its position as an attractive investment environment is being broken by deep political crisis which is causing the largely foreign-owned car industry of the country to become increasingly incredulous.

A no deal Brexit could result in delays in delivery and additional costs for the UK built engines of Ford in the process of getting shipped for fitting in vehicles in Germany, Turkey, the United States and elsewhere.

“We’ve spent the last 40 years putting a business together that relies on cross-border trading,” said Armstrong. “We can’t radically reshape on day one so you’d have to live with (tariffs) for a period of time,” he said.

Ford had hedged itself against the chances of a sharp fall in the value of the pound through the end of 2019, Armstrong said while the strategy of the company to stockpile inventory would help the company to tide over one or two month period of chaos and disruption because of Brexit.

“But it’s impossible really to mitigate the financial impact in the longer term of no-deal,” he said. Ford could try to pass on higher tariff costs, but that would be difficult in Britain, where a recession would mean falling sales, he added.

“We haven’t really factored in completely the negative shock. There are a number of things that we would try to do but the reality is … it would impact the whole of industry, not just Ford,” Armstrong said.

(Adapted From BBC.com)

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Categories: Economy & Finance, Geopolitics, HR & Organization, Regulations & Legal, Strategy, Sustainability, Uncategorized

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