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June 28, 2016 01:00 AM

Nissan struggles to make sense of Sunderland shocker

Nick Gibbs
Reporter covering the UK market for Automotive News Europe
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    Nick Gibbs is UK Correspondent at Automotive News Europe.

    Nissan's team in the UK is “shell-shocked” by the politically and economically explosive decision by the country’s voters to leave the EU, a person close to the company told me.

    That could be one reason why the Japanese firm is the only major manufacturer building cars in the UK that has yet to comment on the effect of the so-called Brexit.

    The shock is understandable. Sunderland, the northeast England town where Nissan has a huge factory, voted emphatically -- 61.3 percent -- to leave the EU.

    Sunderland was one of the first areas to declare the results after counting started late last Thursday. That result gave the country a clear indication which direction the final tally would go. Sunderland also had the largest proportion of Leave votes of any of Britain's car-manufacturing towns.

    Nissan might have expected Sunderland voters to follow the declared wishes of CEO Carlos Ghosn, who said in February that the UK should stay in the EU. “It makes the most sense for jobs, trade and costs,” Ghosn argued.

    Nissan has transformed the fortunes of the once-depressed former coal-mining town. A large chunk of the 8,000 people the company employs in the UK work in Sunderland and last year the factory, one of the most productive in Europe, made 476,589 cars.

    But this didn’t count for much when the city voted.

    “I was surprised by how big the Sunderland win was,” said Andy Palmer, who was Nissan’s chief planning officer before taking over as Aston Martin CEO in 2014.

    There is some good news for Nissan: In the short term, the pound’s crash against the euro will helps its operations “very significantly,” Morgan Stanley analyst Harald Hendrikse said in an investor call on Monday.

    Nissan said that it sends 55 percent of its output into Europe, making it the single-biggest exporter of cars into Europe from the UK. It builds the Qashqai compact SUV, Leaf electric car, Juke small SUV, Note small minivan and the Infiniti Q30/QX30 compact premium family there. In the longer term, the viability of UK production will depend on whether the country can negotiate tariff-free access to the EU, Hendrikse said.

    Nissan shouldn’t take the vote personally, Garel Rhys, emeritus professor of motor industry economics at the Cardiff Business School in Wales said: “This is an issue they will take on board, but they know Europeans are bloody minded [stubborn]. They know it’s not about them.”

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