Will Nissan close its Sunderland plant?

The German magazine Automobilwoche caused quite a few hearts to flutter in the northeastern English city of Sunderland and beyond this week.

"According to reports, Nissan plans to close its Sunderland plant," a short piece in the car industry trade journal stated. "A decision has been made and it is not favorable for Britain," said a Nissan manager familiar with the matter.

Since the Brexit vote in 2016, the future of Nissan's Sunderland plant — and the heavily EU-dependent British car sector as a whole — has been widely speculated upon.

With frictionless EU-UK trade an obvious priority for British-based carmakers, a no-deal or hard Brexit would be bad news for them. Sunderland's Nissan plant is an especially symbolic example. The Japanese carmaker employs more than 6,000 people there directly, with many thousands more employed in connected supply chain jobs in the region. But the city voted heavily for Brexit, by 61% to 39%.

If Nissan were to close that plant for reasons connected to Brexit, it would be a major illustration of the practical consequences of the vote. That's why stories such as the one that appeared in Automobilwoche cause the stir that they do. When a screenshot of the story appeared on social media on Monday, it quickly took off.

But is it true?

Our friends in the North

The context of the piece in the trade magazine is that it appeared in a section called "Flurfunk," which directly translates as "corridor radio," meaning the office rumor mill. In effect, it's a gossip column and does not present itself as hard news.

The Sunderland Echo reported on Monday night that Nissan had dismissed the reports while on Tuesday, the company issued the briefest of statements saying: "These rumors are not true."

An official denial then, but that is hardly the end of the story. Since 2016, Nissan and other carmakers with a large UK presence such as BMW have made it clear that if Brexit is to happen, continued frictionless trade with the EU will be a vital consideration in determining if they stay in the country.

With little time left to strike a trade deal before Britain's post-Brexit transition period runs out on December 31, the possibility of a no-deal Brexit remains high.

Just last week, Nissan's Chief Operating Officer Ashwani Gupta made the clearest admission yet from anyone at the company that a no-deal Brexit would lead to plant closures at Sunderland and elsewhere.

"If it happens without any sustainable business case obviously it is not a question of Sunderland or not Sunderland, obviously our UK business will not be sustainable, that's it," he told Reuters.

"If we are not getting the current tariffs, it's not our intention but the business will not be sustainable. That's what everybody has to understand."

Don't Leaf us

The business model of Nissan Sunderland's plant is heavily based on exports to the EU. More than 50% of the cars made there are sold in the rest of Europe, underlining why the company is so keen for tariff-free trade to continue.

Tariffs are not the only problem, as possible checks on parts and components would hit the car industry's just-in-time model. "The thought of any impediment there would be logistically extremely difficult to manage and would be in no one's interest," then BMW board member Ian Robertson, now retired, told DW in 2017.

Nissan's Sunderland plant is the largest car plant in Britain and produces around 350,000 cars a year. It is one of Nissan's most important production facilities outside of Japan and it already makes three core models: the Qashqai, the Juke and the electric Leaf.

Given that importance and the speculation over its future in recent years, Nissan has been keen to show a commitment to the UK. That included committing to having its new flagship Qashqai model built there, a decision that would amount to an investment of £400 million (€450 million, $532 million).

However, the pandemic has hit those plans. Production was due to start in October but now the official line is that production will begin "after April 2021." In theory, that gives Nissan enough time to wait until the outcome of trade negotiations to determine how to proceed.

The rumor factory

Until those negotiations are concluded, the Sunderland plant and the UK car sector as a whole are likely to remain gossip and rumor magnets. The rumors have not all been doom-mongering from Sunderland's perspective though.

Back in February, just before the full force of the coronavirus rattled the world, the Financial Times reported that Nissan had drawn up a plan to pull out of mainland Europe and double down on its UK commitments in the event of a hard Brexit.

The paper reported that the plan could see Nissan close plants in Spain and France. The idea behind such a move would be that carmakers that import cars to the UK, such as Volkswagen, would face crippling tariffs, giving cars produced in the UK a major competitive advantage to consumers there.

Nissan never confirmed those reports, but they do point toward the complexity of the situation. The UK market will remain a significant one by global standards even after Brexit and is not one carmakers will turn their back on lightly.

It also suggests that the outcome of the ongoing EU-UK trade negotiations is so pivotal to the car industry that — contrary to the trade magazine report — no decision on Sunderland or elsewhere will be made until they are concluded.

Nissan did not respond to DW request for comment for this article.