Honda Closure

This is something of a follow-up of my previous post about car making but I thought I'd specifically cover Honda.

It's personally sad for me because I worked at the Honda factory last year. Wore the overalls like everyone else. They're a really good bunch of people and they care about what they do and constantly aim to improve quality. I wouldn't hesitate to recommend a Civic or a Type-R based on what I saw.

How much can I share? I never know, but I tend to avoid sharing anything that also isn't out in the public.

First of all, is Brexit a factor? Honda say no. There's people saying Honda are just being polite, but Honda were very much talking about there being an impact of leaving the customs union. If Brexit was the killer factor, why wouldn't they say it? If even no deal would have seriously affected them I think they would have made that threat.

As I said in the other piece, there's a lot of forces affecting car making around the world. But, none of those affected this. There's 3 things that I think are working on this.

• Japan-EU trade agreement. The explicit reason Japanese car makers set up car factories in Swindon, Sunderland and Derbyshire in the first place was because of tariffs. Make your cars in the UK, you take 10% off. That makes them competitive with the Renaults and Fiats. Tariffs on cars are being phased out and will be something like 5% in 2021 and fall to zero over the next few years.
• Decline in "car" sales. Overall, car sales are flat. but "car" sales are falling as people are preferring SUVs. The Honda factory in Swindon makes the Civic and Type-R, which are cars, rather than SUVs. Swindon cut 900 jobs 6 years ago because of this.
• Honda plan to be 2/3rds electric by 2025. This means huge factory investment. You can't just start making electric cars on an existing line. Diesel and petrol cars are on separate lines. Electric needs another line, or maybe they ditch diesel for electric. To fit that needs a factory closure to do the installation, lots of new equipment, retraining and so forth.

Put all that together, and someone figured that there were few advantages making in Swindon rather than Japan. The tariff saving is disappearing, so few financial savings and lots of downsides in investment and having one factory allows them to use the same workforce across multiple lines based on the shift from petrol to electric.

I'd also like to add that in typical media fashion, this is painted as a catastrophe for Swindon. Because all media know is giant factories. I'm not saying it's good, or even not that big a problem, but the factory is 3500 jobs in a town of 105000 jobs, and maybe another 3500 in local supply chain. Swindon has a couple of companies of a similar size: Nationwide and WH Smith. But most of it is SMEs you've never heard of in fields like software, machinery and healthcare. 

Car Making

Car making is seen as a crown jewel of UK industry. I think because all consumers understand cars, and because they're reasonably expensive, it's easy to get footage of what they do, which people understand and they seem to employ lots of people.

So when a story appears about Jaguar Land Rover cutting 4500 jobs and moving them to Slovakia, there's a lot of people making a lot of noise about Brexit. Same with the story about Nissan not making the X-Trail.

I'm a leaver. But I'm not here to argue the effects of Brexit on UK car making. Because it's largely irrelevant. Assembly line car making (and I'm not including the likes of Aston Martin) is going to be gone from the UK in the fairly near future because assembly line car making will be gone from Western Europe in the fairly near future with production shifting eastwards.

• Turkey is currently making Renault Clios and Toyota Corollas. Renault plan to expand production there.
• The Fiat 500 is made in Serbia and Poland.
• VW Group of course make Skodas in Czech Republic, the Up, Touareg and Q7 in Bratislava, and are also considering making Passats in the Czech Republic or in Bulgaria.
• Peugeot make 207s and Citreon Picassos in Slovakia.
• The UK made 1.75m cars in 2017. Turkey is at just under 1.7m. UK car making has grown by less than 10% in 5 years, while Turkish production has grown by nearly 60%. Link

Fiat and Toyota are of course making cars in these places because labour is cheaper. According to this, Czech Republic car workers make just over half the wages of UK car workers. And I'm going to guess Turkish car workers are making a little less than the Czechs. And is anyone doubting the quality of those cars? Are they any worse than any other Corolla?

What's keeping car production lines going in Britain is, I suspect that we already have the plants and not much else. In 1986, Nissan couldn't have put production in Eastern Europe because it was still communist. And even for some years after, they couldn't have done it because of things like transportation and infrastructure. But these countries now have everything in place and eventually, our manufacturers will follow.

At a larger level, I think people in the UK need to understand that production line manufacturing is either going or gone. UK manufacturing still matters, but it's manufacturing that's more specialised, small scale or customised like F1 cars or the company near me that hand-makes furniture. The part of manufacturing we will keep for some time is things like product design and engineering - Dysons get made in Malaysia but they get designed in Wiltshire.