25 February 2019

The domino effect strikes at Honda UK

People often talk of the domino effect in business - when one company enters or exits a sector or market then others may follow. One would hope that this was not the case with Honda’s decision announced last week to close its Swindon, UK plant in 2021. There are global market and production capacity utilisation reasons for the move: the plant makes the Civic hatchback for the US and while Civic sales in North America Civic sales fell by 14% to 325,760 vehicles in 2018, nearly a third of that volume was imported. The carmaker has a worldwide capacity to turn out 5.4 million vehicles a year but last year, it sold only 5.24 million, giving it a utilisation rate of around 97%.

The move follows Nissan’s decision not to bring the promised production of its X-Trail SUV to the Sunderland plant, a move which may have paved the way for a mass exit from the UK for Japanese and other foreign and foreign-owned car makers.

It is an unfortunate fact that these two plants have brought much-needed employment to regions that were quite deprived - when I first visited Sunderland in the 1980s, unemployment was running at up to 50% of the working age population, following the demise of the shipbuilding and coal mining industries that had once thrived in the area. This means that these areas will be particularly hard-hit following these decisions.

The loss of Honda must be viewed as a blow not just for the plant’s workers but for the whole supply chain, and it may well have severe impacts on the manufacturing and retail sector as a whole. Various academics have forecast that up to 10% of the 186,000 people working in assembly and supply chain jobs in the UK could become unemployed after the string of job cuts announced by Ford, Jaguar Land Rover and Vauxhall, plus the projected loss of greater employment triggered by the removal of the X-Trail from Nissan’s UK manufacturing plans.

Honda says the move is part of its plan to realign its global production footprint for three reasons: to soak up excess capacity, to pave the way for electrification and refocus on the global markets where it sells the most vehicles. Therefore shifting Civic production to plants in the US plants and Canada does make sense - make where you sell was the mantra of all OEMs for many years. Whether Brexit was or was not influential in Honda’s decision is a moot point; the jobs are going to North America or possibly Japan as Honda has no other significant vehicle making plants in Europe - so workers cannot even ‘get on their bikes’ and follow the work.

Honda have said that the changing face of automotive design - particularly EVs and autonomous and connected vehicles - was the reason for the decision but these advanced vehicles will, in theory require fewer assembly jobs and craft skills and more high-tech knowledge to design and build. This type of skill is what we have excelled at in the UK. Witness our advanced automotive technology centre at Coventry where our New Mobility Live conference was held, a hub of technological brilliance and testament to the exceptional marriage that the UK can make between academia and industry.

Of course the government have come in for tremendous criticism for ‘allowing this to happen’ but we must look a little deeper. UK PLC must redouble its efforts to nurture its tremendous R&D skills base and transform it into a effective and sustainable industry currency. While we may not yet be in danger of becoming a nation of shopkeepers and museum attendants, as some people have predicted in the past, we must exploit and aggressively market our expertise in R&D and benefit from the global thirst for advanced design and technology in automotive, or face the not so gradual destruction of our manufacturing base, in all industries.

Simon Duval Smith

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