What are the real reasons Honda is closing its factory in Swindon? | Euronews answers

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Published on 19/02/2019 - 18:59

Honda has announced it will close its factory in Swindon, UK, which has many asking whether this is a move prompted by Brexit. But what are the real reasons Honda is closing the plant?

Honda struck the latest blow to the UK's car industry on Tuesday, announcing plans to close its Swindon manufacturing plant by 2021.

The Japanese car maker currently hires around 3,500 people in its Swindon factory, which is the company's only manufacturing plant in the European Union.

In a statement released after a press conference on Tuesday morning, Honda said its restructuring plans came in response to the "unprecedented changes in the global automotive industry."

But what does this actually mean? And who is going to be affected by these changes?

How important is Honda's Swindon plant?

It depends on who you are talking to when it comes to this question.

To the more than 3,500 employees at the plant itself, many of whom have had lengthy careers at the company, and the thousands more employees working at subsidiary companies, this plant is extremely important.

It was first established in 1985, before quickly expanding to become an engine plant.

For 24 years, it has been known for becoming the global manufacturing hub of the Honda Civic, producing 150,000 units per year, which are then exported to over 70 countries around the world.

MP for South Swindon Robert Buckland told Euronews he reacted with "concern and surprise" upon hearing the news.

"Honda is a major employer here in Swindon," he said in an email.

"The closure of the factory will also affect many of the company’s local supply chains in and around the town."

On Tuesday morning, several employees at the plant took to social media to share their devastation at the news.

"All the rumours are true!" one employee wrote. "After 17 years, it's all over."

The same employee went on to inform other colleagues who were scheduled for shifts later in the day, saying everyone had been sent home after a morning meeting.

Euronews spoke to another employee on condition of anonymity, who said he had learned about the planned closure via news reports.

"It was a shock," he told Euronews, adding that he was also scheduled for a later work shift.

"I'm not due in until [later] today, but I've received voice recordings of the meeting this morning that confirms everything."

"I've worked for Honda for 6 years," he added.

The UK's Business Secretary Greg Clark echoed the employees' sentiments, writing in a statement that Honda's decision was a "devastating decision for Swindon and the UK."

Why does Honda say it is closing the plant?

There has naturally been a lot of speculation over the connection between the timing of Tuesday's announcement and the fast-approaching Brexit date in March, but Honda maintains that this is not accurate.

"This proposal is not influenced by Britain’s plans to leave the EU," a Honda spokesperson said in a conversation with Euronews.

So, what is Honda's reasoning?

The carmaker said it is following "unprecedented changes" in the car industry, namely the overtaking interest in electric vehicles.

It relates to the "increased pace and requirement for electrification," Honda told Euronews.

"We are announcing these proposals now because we need to make decisions about the production of the new Civic model (post-2021)."

Resources and production will therefore be moved to China, Japan and the United States, "where Honda expects to have a high volume of customer demand," the spokesperson added.

Are there any other factors that might be involved in Honda's decision?

Honda said its main reason for closing the plant was due to the industry's changing focus to electric vehicles, but many have pointed to other factors that may have influenced this decision.

Brexit

While the company has maintained its decision was not affected by Brexit, several high-profile figures have not accepted that it hasn't at least played a role.

Labour Party leader Jeremy Corbyn said "the government's disastrous handling of Brexit is letting people down across the country," adding, "Honda's decision to close its factory is a huge blow to the thousands of workers and the whole community."

A number of social media users also expressed confusion after resurfacing a January tweet by North Swindon MP Justin Tomlinson that said Honda would "remain committed to Swindon," and that it supported UK Prime Minister Theresa May's Brexit deal.

Des Quinn, a spokesperson for the Unite the Union trade union, said that while Honda did not stipulate Brexit as a reason for the closure, the group believed "the uncertainty that the Tory government has created by its inept and rigid handling of the Brexit negotiations lurks in the background."

"If the government had delivered a strong and stable Brexit that protected the economy and jobs, we may well have been in a very different position today."

EU-Japan trade deal

A landmark trade deal between Japan and the European Union that came into effect at the start of the month has led some to believe that this could also have swayed Honda's decision making.

The deal, which marked the start of the biggest free-trade deal in the world, "effectively removes tariffs on Japanese-built cars imported into Europe," Autocar's deputy editor, James Attwood, wrote.

"That reduces Honda’s need to have a European manufacturing base."

Diesel versus electricity

As Honda pointed out themselves, the automotive market is increasingly moving its focus towards electric cars, while moving away from diesel — the type of engine the Swindon plant manufactures.

In fact, Honda's sales have been struggling in general across the European market. In the last decade, sales have almost halved.

As for the Civic, sales in Europe have also declined year on year, and have more than halved in the last decade.

Robin Harding, the Financial Times' Tokyo bureau chief, said it was "an obvious business decision" for Honda to close its UK plant.

"However, Honda has avoided that obvious business decision for many years," he added.

"Instead, they've tried everything possible to keep Swindon open, such as exporting to the US."

US trade tariffs

But Swindon's exports to the US have also posed their own issues, following US President Donald Trump's threats of a trade war, which would see large tariffs placed on cars imported to the US from Europe.

What are other carmakers in the UK doing?

Honda's decision isn't the first blow to the UK's automotive industry.

Nissan announced earlier this month that it had scrapped plans to build its X-Trail in Sunderland, while Jaguar Land Rover announced in January that it was to cut 4,500 jobs from the UK.

For Jaguar Land Rover, this announcement followed on from last year's decision to cut a further 1,500 jobs.

What now for Honda's workers?

The UK government and Unite the Union said it was creating a joint task force to examine Honda's business case, and would look into methods of support for the thousands of people affected.

"I will convene a taskforce in Swindon with local MPs, civic and business leaders as well as trade union representatives to ensure that the skills and expertise of the workforce is retained, and these highly valued employees move into new skilled employment," UK Business Secretary Greg Clarke said.

But for Honda's individual employees, the new reality has hit hard.

"Of course we're worried about the future," one employee told Euronews. "Worried about finding another job that pays similar money with having a young family, bills and hobbies to pay for."

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