Ghosn outlines Brexit, NAFTA uncertainties facing Renault-Nissan
PARIS -- Renault CEO Carlos Ghosn acknowledged that uncertainties surrounding Britain's exit from the European Union and a possible renegotiation of the North American Free Trade Agreement under President Donald Trump posed "risks" for Renault and its Japanese partner, Nissan, in 2017.
The Nissan plant in Sunderland, England, became a political flash point last year ahead of the Brexit referendum after Ghosn warned that the company might halt investment there if a "leave" vote prevailed. Several months after the vote Ghosn met with British Prime Minister Theresa May and said he had received assurances that the country would remain a competitive place to do business.
He confirmed that position on Friday at Renault's 2016 financial results presentation.
"We agree with the British government that our investment is based on the idea that the competitiveness of this plant, which is a European plant based in Britain, should be preserved," he told analysts and reporters. "So our commitment in terms of investment is based on that. What I certainly hope is that the British prime minister keeps this in mind when negotiating Brexit."
The Sunderland plant, the largest in Britain, produces the Nissan Juke, Qashqai, Note and Leaf models as well as the Infiniti Q30 and QX30, according to Automotive News Europe's Guide to European Assembly Plants.
Ghosn emphasized that any talk of tariffs or quotas was premature. "For the time being, Brexit is a virtual thing," he said. “The status quo is that Britain is a part of the EU as we speak, and trade continues."
18 billion euro hit
Nonetheless, Renault and other multinational automaker's remain vulnerable to currency fluctuations, and the British pound has lost value against the euro since the vote to leave the EU last June.
A Feb. 8 report from Evercore ISI said that the company's guidance has been for an 18 million euro negative effect on EBIT for every 1 percent weakening in the British pound relative to the euro.
Ghosn also discussed fallout from any potential changes to NAFTA, which President Trump has vowed to renegotiate to create more favorable terms for the United States.
"Right now there's reason to believe that NAFTA itself will be renegotiated," Ghosn said. "If it's not the case, then fine. But if it is, well then, there's uncertainty." Ghosn added that topics such as this usually take time to negotiate.
"But whatever comes out will have an effect on all automotive manufacturers, including Renault, because we have a plant in Mexico that was built there precisely to have local content in Mexico," Ghosn said. "If NAFTA is renegotiated, that might upset the apple cart."
He noted that Mexico's trade agreements with other Central and South American countries could then be affected, and also cited other examples of trade agreements "that might put us in an uncomfortable position," including between Argentina and Brazil, two prominent markets for Renault.
"I'm not saying we have conflicts at hand, but there may be re-negotiations that may result in either good news or bad news," Ghosn said. "It's our business to look at risks and see how we can hedge for such risks."