LONDON -- British Business Minister Greg Clark said Nissan will need to reapply for up to 80 million pounds ($104 million) in financial aid after the automaker canceled plans to build the X-Trail at its UK factory.
The government promised the support in 2016 when Nissan said it would add production of diesel versions of the X-Trail SUV at its plant in Sunderland, England. On Sunday, Nissan said it would consolidate production of the next-generation X-Trail in Japan, citing Brexit concerns and falling diesel sales..
Clark told parliament on Monday that Nissan would need to re-apply for the funding because the terms of its investment had changed. He said that of 61 million pounds' worth of grants which had already been approved, only 2.6 million pounds had so far been paid to Nissan.
Clark also on Monday released the text of a letter he sent to Nissan in 2016 detailing the government’s support proposals. Previously the government had refused to publish the letter on multiple occasions, leading to accusations of back-door deals.
Nissan said it took the decision on the X-Trail for business reasons, with continued uncertainty surrounding future UK-European Union relations "not helping."
The move follows a 46 percent drop in UK auto investments last year as automakers delayed decisions on upgrading machinery and factories.
Nissan sought to allay concerns of its Sunderland employees, saying it will go ahead with planned spending on the next-generation Juke and Qashqai models.
Sunderland’s production of the Qashqai, Juke, Leaf and Infiniti models fell 11 percent in 2018, reflecting the wider UK slump. Declines have been steepest for diesels such as the X-Trail.
Nissan builds 30 percent of Britain's 1.52 million cars at the factory, the country's biggest car plant. The automaker exports the vast majority of the vehicles to EU countries and, like the rest of the industry, is worried about tariffs if there is a no-deal Brexit.
The decision not to build the SUV in Sunderland, which employs more than 7,000 people and supports another 28,000 supplier jobs, is a blow after Prime Minister Theresa May’s government had previously gone out on a limb to safeguard Nissan’s investment in the UK.
On Feb. 1, an EU-Japan free trade agreement also kicked in, which includes the EU's commitment to removing tariffs of 10 percent on imported Japanese cars, diminishing part of the business case for building in Europe.
Representatives of the Unite union met Nissan managers on Monday and said they would push to secure the future of the Sunderland site. "Unite will continue to press for further long-term guarantees over future investment and new models to secure the site’s future for generations to come," said acting national officer for the automotive sector Steve Bush.
Reuters and Bloomberg contributed to this report