After sales drop Nissan may cut jobs at UK diesel plant

The Japanese car manufacturer Nissan may cut hundreds of jobs at its Sunderland plant in the UK. Nissan is Britain's largest car manufacturer.

Diesel sales are plummeting

Diesel sales have been declining and these layoffs bring one more blow to the UK auto industry. Nissan would not confirm the job losses. However, local reports suggest that long-serving staff could be asked to take voluntary redundancy. Unite, the union at the plant had been assured that there would be no compulsory layoffs at the plant. There are about 7,000 workers at the site. A source with knowledge of the situation says that hundreds of jobs would likely go at Sunderland.

The manufacturer would not confirm any job losses, although local reports suggested long-serving staff could be asked to take voluntary redundancy.

Overall drop in demand

So far this year Nissan's British sales have gone down more than one third. Even in a dismal year so far for everyone this is a substantial drop. However, overall demand is down a more modest 12 percent. Nissan exports 8 out of ten of the cars it makes in the UK. Across Europe in March, Nissan sold only 75,000 vehicles as compared with 91,000 in March of 2017.

Nissan claimed that its job cuts would be short term as the company was looking to build new versions of the Qashqiai, Juke, Infinity and the new X-trail using new technology.

A spokesperson for Nissan said: “As previously communicated, we are transitioning to a new range of powertrains over the next year. As we make the operational changes required to support this, we will be managing a planned short-term reduction in powertrain supply and plant volumes in line with our 2018 business plan. We are now discussing these operational changes with our employees.”

Steve Bush an official with the union Unite said:“Unite has been assured that any job reductions will be on a voluntary basis and on enhanced terms.Over the coming weeks, we will be giving our members maximum support and ensuring that they can make informed choices about their future. We expect to see temporary workers at the plant move into permanent positions as volumes pick up again in future years.”

Jaguar Land Rover also cuts jobs

Jaguar Land Rover (JLR) also is cutting jobs and reducing output at two of its UK plants. Although Nissan claimed that its decision had nothing to do with Brexit, JLR claimed that it did. However, sales are also impacted by restrictions on diesels in some countries.

Vauxhall also cutting back

Another UK automaker Vauxhall is also cutting by terminating the contracts of all its 326 dealers across the UK. Although the dealers employ about 12,000 people the company claimed that it did not expect there would be heavy job losses from the move.

Industry has expressed fears over Brexit but Nissan promised it would manufacture new models in the UK.

Consumers are being discouraged from buying diesels. The Society of Motor Manufacturers claims that diesel vehicles are being "demonised" . UK tax policy is deterring customers from buying new diesels. There was a small tax increase on diesels this month.

Restrictions on diesels are expected to take place in several cities in the UK. In Europe where many Nissan diesels are exported we can expect to see an outright ban on diesels in many cities in the next five to seven years.

David Bailey a professor of industrial policy at Aston University said:“Certainly there is a massive shift away from diesels across Europe. There is a perfect storm combining dieselgate, legislative changes and the reduction in resale values for owners of the cars. Nissan are exposed to that, as about 25% of what Nissan produce up in Sunderland is diesel. But they have a lot of hybrid technology after the takeover of Mitsubishi which we can expect to see more of, as well as the electric technology behind the Leaf, so I think they are well positioned to see through this temporary shock.”

Nissan Motor Company

Nissan Motor Company Ltd. is a multinational automobile maker with headquarters in Nishi-Ku, Yokahama. The company makes Nissaan and Infiniti brands. Since 1999 Nissan has been part of the Renault=Nissan-Mitsubishi Alliance. As of 2014 Renault of France held a 43.5 percent stake in voting shares. In turn Nissan has a 15 percent share of Renault shares.

In 2013 Nissan was the sixth biggest automaker globally. Toyota and GM are first and second. Nissan is the most popular Japanese brand in China, Russia, and Mexico.

Nissan is one of the world's largest electric vehicle(EV) producers. As of mid-December of 2016 it had sold 275,000 EVs world wide. The most popular brand is the Leaf, a world top seller. As of September 2016 it had sold 240,000 units. Nissan was also the largest car manufacturer in North America.

Previously published in DIgital Journal

Trump plans steep tariff on Mexican car production

Trump has targeted Japanese car production in Mexico as well as that of U.S. auto makers in an attempt to bring production back to the United States.

Japanese automakers already produce far more vehicles in the U.S. than in Mexico. Mexico produces about 1.4 million vehicles annually compared to the US where the top three Japanese automakers already produced around four million vehicles in 2015. The large automakers Toyota and Honda produce less than ten percent of their output in Mexico while Nissan is most at risk as it produces a quarter of its vehicles in Mexico.

Trump has claimed that as well as renegotiating the North American Free Trade Agreement (NAFTA) between Mexico, the U.S., and Canada he would initiate a 35 percent tariff on cars exported from Mexico to the US. Even a 10 percent tariff would hit Nissan the worst with a 10.3 percent reduction in earnings. Mazda would lose 5.5 percent. Honda 2.2 percent and Toyota a mere 0.7 percent. None of the four companies have any immediate plans to change the location of their production.

However, analyst Chris Richter said: "As long as this administration is in place I suspect (Nissan is) not going consider any additional capacity there." Honda has already announced it will expand U.S. production of popular CR-V-SUV for the U.S. market. Toyota on the other hand is building a new plant in Mexico to produce the entry level Corollas sedan which is currently being produced at plants in Mississippi and Ontario. Demand for the vehicles has slumped as gasoline prices have dropped. However, Toyota president Akio Toyoda claimed: "We're always considering ways to increase production in the United States, regardless of the political situation."

Trump has also criticized U.S. companies such as GM and Ford Motor company for manufacturing outside the U.S. including Mexico but Nissan remains the company most at risk from Trump's policy. Nissan built its first Mexican plant fifty years ago and is now producing 800,000 cars there annually mostly the Versa and Sentra sedans. It exports roughly half of its production to the U.S.

Mexico is often thought of as attractive to auto-makers because of its low wages but there are other quite important factors. Mexico has agreements with 44 countries giving it access to fully half the global market tariff free. In contrast, the U.S. has similar deals with only 20 countries that only make up nine percent of global sales. Trump has complained about GM's Chevy Cruze hatchbacks produced in Mexico but most of the production goes overseas not to the U.S. They are more popular with buyers in South America and Europe than with Americans. The U.S. might gain more jobs simply by negotiating agreements with other countries such as Mexico has.

Kristen Dziczek, an analyst, says: "It’s pretty ironic that what makes Mexico successful is free trade. You can look at the new investment that has gone into Mexico and while a huge portion is for the U.S., they are selling a lot elsewhere, too." While auto makers do save hundreds of dollars on labor costs part of this saving is eaten up by other costs such as shipping so that as a result the saving per car is actually a small percentage of total cost. Hence, automakers often increase production in Mexico for reasons other than a lower labor cost. The companies save because of Mexican trade deals with Europe: ".. in total, an automaker saves more than $4,000 by building and shipping a car from Mexico to Europe instead of from the U.S. If Trump could match those trade deals, he would erase an average $2,500-per-vehicle cost advantage over American-made midsize cars."

The Ford Motor Company announced that it will not build a projected plant in Mexico. Trump tweeted: “Thank you to Ford for scrapping a new plant in Mexico and creating 700 new jobs in the U.S. This is just the beginning - much more to follow." Ford announce that it was canceling the $1.6 billion Mexican factory and instead investing $700 million in a Michigan plant.

US February auto sales rise significantly

February auto sales in the United States rose at a seasonally adjusted annual rate in February of 17.43 million according to WardsAuto. Autodata put the rate at 17.54 million.

2016 started off in January with sales growing at the fastest pace since 2000. February continues the trend upward — most companies beat expectations with Ford among the the leaders. Of the other big three, GM posted an unexpected decline while Fiat Chrysler did very well. Ford sales grew by a humongous 20.2 percent compared to last year while expected growth was 12.6 percent. GM sales declined by 1.5 percent while sales were expected to grow by 5.1 percent. Fiat Chrysler sales grew by 11.8 percent while expectations were for a growth rate of just 9.2 percent.

Volkswagen sales were still hurting as a result of their diesel emissions scandal. Sales slumped by 13 percent. However, the Tiguan soared in sales by 78 percent. Luxury German maker BMW sales also declined by 12.4 percent. However, Porsche was one bright spot among German auto manufacturers with a sales jump of 11.2 percent.

Among Japanese auto makers Nissan had a sales jump of 10.5 percent much more than the 7.2 percent expected. Toyota had a gain of just 4.1 percent less than the 4.9 percent expected. Honda had a large jump of 12.8 percent compared to expectations of 8.8 percent.

Among Korean auto makers Hyundai had a marginal 1 percent gain in sales while Mazda had a large drop of 16 percent. Kia was the big winner with a sales jump of 13 percent.

Ford's impressive growth was fueled by strong demand for SUV and crossover vehicles whose sales increased by 28 per from last February. However, the popular F-Series pickup trucks also sold well, 10 percent better than a year ago. Cars also did quite well jumping by 19 percent from last year. Fiat Chrysler's sales were bolstered by strong demand for the Jeep SUV and for the Ram truck line.

Several factors may have influenced the increase in sales. Michelle Krebs, an analyst with Autotrader said: "In addition to positive economic factors, February car sales got a boost from the Super Bowl, (the) Presidents Day (holiday) and beefed up dealer advertising." Analysts expect that eventually sales will hit a plateau and taper off, but since the 2008-9 recession sales have been increasing. On the east coast of the US, a January blizzard may have resulted in purchases being delayed until February. Low fuel prices, easy credit, and a high employment level may also help increase demand for new cars. The low fuel prices may be leading to more sales of expensive trucks and SUVs. Edmunds.com reports that light trucks and SUV's outsold cars for thirty months in a row and amount to 60 percent of sales overall in February.