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Truckmaker Volvo builds safety stockpiles to prepare for no-deal Brexit

Truckmaker Volvo builds safety stockpiles to prepare for no-deal Brexit
FILE PHOTO: A worker holds a component for a Volvo truck at the Muller manufacturing facility in Redditch, Britain August 28, 2018. REUTERS/Darren Staples/File Photo -
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Darren Staples(Reuters)
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By Esha Vaish

STOCKHOLM (Reuters) – Sweden’s AB Volvo <VOLVb.ST> has triggered its hard Brexit contingency plans, with the truckmaker building “safety stock” with its British dealers and considering alternative shipping routes to minimise disruption.

Volvo had readied plans for five different scenarios but was preparing for a hard Brexit, a spokesman said in response to questions asked after the British government said on Tuesday it would implement plans for a no-deal Brexit in full.

With less than four months to go before it is due to exit the European Union, the government said it would tell businesses to prepare for leaving the bloc without a deal, a scenario which could lead to disruptions of up to six months at some ports.

The spokesman said Volvo would carry out an “end-to-end evaluation and adjustment of its processes, systems and flows” as Brexit could hit the lead time and cost of goods transfers in both directions, as well as data transfers and processing activities.

But the greatest potential risk, he said, was that deliveries of complete products would face transportation delays due to new customs clearance regimes. The company had begun preparing for this situation.

Within the EU, trucks drive smoothly through border checks. But in a no-deal Brexit, even a few minutes’ delay at customs for each truck would likely see vehicles backed up at ports and queued up on feeder roads both sides of the Channel.

“In some areas we have developed safety stock at the dealers in the UK, and for others we have worked to ensure that orders due prior to March 29, 2019, are filled as early as possible,” he said.

He declined to say how many weeks of stock it was storing.

Volvo was also developing plans to ensure customer support would be available regardless of the Brexit outcome.

Firms in many sectors have been buying warehousing space and stockpiling to ensure they can meet demand and keep manufacturing going if the frictionless movement of goods to and from the continent is lost.

Automotive companies including Ford <F.N>, McLaren Automotive, Bentley, Aston Martin <AML.L> and Volvo rival Scania <VOWG_p.DE> have laid out Brexit contingency plans.

Volvo has a British construction equipment factory in Motherwell, and some suppliers for its trucks business are also located there. It does not break out its earnings in the UK.

The spokesman said Volvo was considering “all possible alternatives” to secure minimal disruption, including new shipping routes to avoid congested ports.

(Reporting by Esha Vaish in Stockholm; editing by Niklas Pollard and Jan Harvey)

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