Nissan Backtrack on X-Trail
Reports over the weekend that Nissan no longer plan to build its X-Trail vehicle at its Sunderland manufacturing facility have been confirmed in a letter to employees.
Sky News, The Guardian and the Financial Times, all published details of the letter to workers in which the car maker said it had taken the decision “for business reasons”. Nissan went further than many large organisations by explicitly citing Brexit as a contributing factor in its decision, claiming “The continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.”
Nissan, who celebrated their 30th anniversary of UK car production in 2016, said that other models would not be affected by the decision. The Japanese plant currently produces the Qashqai, Juke, and Nissan’s all-electric vehicle ‘leaf’, as well as the lithium-ion battery that powers the car.
Response to the announcement have been typically polarised; remainers claiming the decision to be further evidence of the profound economic consequences of the vote to leave the European Union while Brexiters point to the ongoing declining popularity of Diesel engines and the key influence.
So what’s diving the decision — Brexit or the decline of Diesel? Well, probably both.
In David Conn’s excellent Guardian long read on Nissan, written in October 2018, Sir Ian Gibson, former Nissan UK and Europe Chief Exec, explains that Nissan decides where to produce new or updated models on the basis of internal competitive bids; a process that pits global plants against one other.
So although the news this weekend isn’t good concerning the X-Trail, the strategy could be part of a cost-reduction effort ahead of the next round of bidding.
Arguably the plants most importnat model, the Qashqai, the 4th most popular selling car in the UK in 2018, is due for its third generation upgrade in 2020/21. Nissan has already signalled that the next generation will be hybrid fuel based on shared platform, or Common Module Family, a technology designed in collaboration with partners Renault. Longer term, the desire to move to all-electric passenger vehicle would require an entirely new design demanding significant plant investment.
Yet, the announcement timed to coincide with the landmark agreement between the EU and Japan, the biggest trade deal in the history of the EU, seems significant. The Economic Partnership agreement between the EU and Japan will phase out 10 per cent tariff on Japanse car imports to Europe by 2027.
The Sunderland plant employees 6,700 and produces up to 2,000 cars a day while the Nissan supply chain in the UK is thought to employ a further 30,000. In April 2018 it was announced it was cutting workers as it moved toward hybrid powertrains following its ambition to ditch diesel passenger cars by 2021. Nissan has historically responded to market turbulence with job losses prior to renewed further investment.
Following the 2008 financial crisis, the firm cut 1,200 jobs before further re-tooling ahead of the production of new models from 2010. This helped secure commitment to building the Qashqai in Sunderland and led to a £192m investment supported by a £20.7. UK government grant.
Nissan is also reducing production elsewhere; two of its plants in Mexico, Cuernavaca and Aguascalientes, announced plans to reduce employment by about 1,000 in 2018 citing “challenging market conditions” and an increase in the cost of raw materials.
Nissan has experienced declining profitability in the US (which the Mexican plant supplies) and planned to reduce production by up to 20 per cent on the back of falling sales in the US.
Nissan has a chequered employment relations history and has used threats of plant closures as a tactic to persuade employees not to Unionise. Most recently workers at the Canton plant Mississippi voted to to oppose unionisation following a long campaign by the United Automobile Workers.
