Nissan Defuses Brexit Tension With Promise to Build SUVs in U.K.

(Bloomberg) -- Nissan Motor Co., the biggest auto producer in the U.K., promised to maintain production at its Sunderland plant in northern England, defusing tension with the British government over potential compensation connected to Brexit.

The Japanese automaker will start manufacturing the X-Trail sport utility vehicle at the factory in addition to the next generation Qashqai, according to a company statement. The plant already makes 2,000 vehicles daily including the Qashqai, Note, Juke and Leaf models.

“Support and assurances” from the U.K. government persuaded Nissan to continue investing in the site, which employs more than 7,000 people and supports another 28,000 supplier jobs, Chief Executive Officer Carlos Ghosn said in the statement. “I welcome British Prime Minister Theresa May’s commitment to the automotive industry.”

Last month, Ghosn said Nissan may ask the U.K. to compensate it for any negative consequences resulting from Brexit and balked at making new investments in the Sunderland plant, which manufactures about a third of all cars produced in the country. Indications that U.K. Prime Minister Theresa May favors a so-called hard Brexit -- gaining greater control over immigration but losing membership in the single market -- have raised concerns that U.K. exports might face tariffs in the EU.

“This vote of confidence shows Britain is open for business,” Prime Minister May said in a separate statement. “This is fantastic news.”

Currency Advantage

Manufacturers like Nissan, which exports most of the cars it builds in the U.K., have benefited from the pound’s fall in the wake of the June referendum. Tariffs on trade with the EU would hurt the carmaker since about half the vehicles made in Sunderland are exported to Europe.

Ghosn, 62, told reporters in Japan last week that Nissan would decide next month whether to continue producing Qashqai SUVs in Sunderland. The agreement with Nissan drew questions over whether the government had induced the car company to stay by promising to shield it from any Brexit-related fallout. Speculation about this could prompt other industries to intensify their lobbying.

“Many will now want to know whether specific assurances were given to Nissan, and if so, what they were,” said Labour lawmaker Chuka Umunna. The government assured Nissan it will get the best deal for industries and didn’t make a special deal for Nissan, May’s spokesman, Greg Swift, told reporters in London.

A Nissan spokeswoman wouldn’t say whether Thursday’s decision will result in higher output or more jobs at the plant, only that the production of the new models would start in “a few years.” The company also wouldn’t comment on the future of other models made in Sunderland.

Nissan has invested 3.7 billion pounds ($4.5 billion) in the 30-year-old site and manufactured 9 million cars there, making it the U.K.’s biggest auto production facility. Replicating the effort in another country would be expensive for the Yokohama, Japan-based carmaker, which is aiming to cut costs amid intensifying competition from rivals.

--With assistance from David Hellier and Ma Jie To contact the reporter on this story: Ania Nussbaum in Paris at anussbaum5@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy

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