UK Promised Nissan $104 Million To Keep Producing Cars in Britain

Deal or no deal?
GM Sunderland plant (Photo: Reuters)

The British government in 2016 offered up to $104 million to Nissan Motor Company to keep producing cars in the United Kingdom in a special deal that has now been confirmed.

The revelation follows Nissan's decision on Sunday to withdraw the production of its X-Trail compact crossover SUV from its massive plant in Sunderland and move this to another factory in Japan. The massive Sunderland plant with its 7,000 employees produces one in three British cars. Sunderland is the largest car plant in the country.

Nissan blamed the uncertainties caused by a No-Deal Brexit for its decision to move production of the X-Trail offshore. The UK is slated to withdraw from the European Union on March 29, deal or no deal.

While Nissan reassured employees that none of them would be fired, the move to make the X-Trail in Japan was seen by business firms as an inkling of what's in store for the British business community should a No-Deal Brexit emerge. The government of Prime Minister Theresa May has only seven weeks to craft and have approved a new Brexit deal, something it has been unable to accomplish in over two years.

In the case of Nissan, the availability of the full $104 million (£80 million) was contingent upon the Japanese firm allocating production of its Qashqai crossover SUV and X-Trail to Sunderland. Nissan did so on October 27, 2016, said CNN.

Dated October 21, 2016, the letter was written by Business Secretary Greg Clark to former Nissan CEO Carlos Ghosn, who now languishes in a Tokyo detention cell charged with financial wrongdoings.

Clark told Ghosn that supporting carmakers will be a priority of the government during Brexit negotiations. He also said he'd ensure Nissan will continue to export to and from the European Union.

"We recognize that the UK has a stake, and we are backing your continued success in Sunderland to the hilt," Clark wrote.

In parliament on Monday, Clark called Nissan's decision "disappointing." It is unclear if Nissan has received the full amount and what the consequences for the deal will be now that Nissan has violated its key provision.

In 2016, Nissan announced plans to build the new X-Trail in the UK after receiving positive assurances from the UK government, one of which was Clark's letter.

Nissan made the decision to produce the X-Trail both at Sunderland and Kyushu because "there was a good business case for bringing production to Europe, as well," according to Nissan Europe Chairman Gianluca de Ficchy.

"The continued uncertainty around the UK's future relationship with the EU is not helping companies like ours to plan for the future," according to de Ficchy.

He said Nissan plans "to optimize our investments and concentrate production in Kyushu, instead of adding another production site." 

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Loading...
Sign Up for Newsletters and Alerts