Nissan would find it cheaper to invest in its Barcelona factory than to close it, a senior Spanish industry ministry official said on Monday, pegging the estimated cost of a shutdown at more than 1 billion euros ($1.1 billion).
Europe has long been a difficult market for automakers due to overcapacity, stiff competition and tight regulations, and economic shutdowns to stem the spread of the coronavirus have piled on more pressure.
People with knowledge of the matter have told Reuters Nissan may be considering closing its factory in northeastern Spain but has made no decision yet.
The factory builds pickups and vans. If the factory closes, Nissan would relocate production of the Navara pickup to South Africa, while a replacement for the e-NV200 van would be built at Renault's plant in Maubeuge, France, according to reports.
Nissan earlier this month pushed back against reports that it will reduce its European presence to focus on the U.S., China, and Japan, relying on its two best-selling SUVs, the Qashqai and Juke, in the region.
Nissan has told union leaders at its plant in Barcelona, Spain, that they will be informed about the factory's future before summer.
Spain's secretary for industry, Raul Blanco, said he had received no official confirmation of Nissan's plans for the plant, which along with related facilities in the area employs 3,000 people. The company is due to unveil a strategy update this week.
"It is much cheaper to invest than to leave," Blanco said, adding it would cost the company more than 1 billion euros to settle labor and contractual issues in closing what would be its last facility in Europe outside of Britain.
The factory needs around 300 million euros in what he said was overdue investment.
"The situation is very difficult, and we have to be realistic," Blanco told reporters on a conference call. "Nissan has not invested in the plant for 10 years."
Referring to any potential closure, he said: "This is not a friendly situation."
The automotive industry accounts for around 10 percent of Spain's economic output, according to government trade and investment body ICEX.
"The plant's situation has worsened but it is fully competitive if it is put to work and the right investments are made for the next 10 years," Blanco said.