Exclusive: Aston Martin triggers contingency plans for no deal Brexit

Business reporter(wp/reuters):
British carmaker Aston Martin (AML.L) has triggered contingency plans to cope with a potentially disorderly Brexit, including hiring a new supply chain chief and preparing to fly in components as well as use ports other than Dover.

Britain, the world’s fifth largest economy, is due to leave the European Union in just over 80 days but a negotiated withdrawal agreement looks set to be voted down by MPs next week, making a “no deal” exit - and disruption to trade - more likely.

Britain’s car industry, which employs over 850,000 people and is one of the country’s rare manufacturing success stories, has warned that leaving the world’s biggest trading bloc without a deal would add costs and could halt output due to snarl-ups.

Aston Martin Chief Executive Andy Palmer said the luxury automaker, which outlined its contingency plans in October, had no choice but to authorise them at a board meeting in December.

“I don’t think we’ve been in a position in the last two years where we’ve been further apart from understanding where we’re going to end up,” Palmer told Reuters, declining to put a figure on the “accumulating” cost of the plans.

“We programme a car to align and order all the parts for those cars twelve weeks in advance. You don’t need to do the maths to know that therefore takes us across the Brexit period.”

“We have to prepare for the worst case scenario.”

Aston Martin, the preferred drive of fictional secret agent James Bond, joins a growing list of companies readying for a no deal Brexit. Data last week showed manufacturers ramping up stocks in preparation for potential border delays.

Aston is signing deals with supplier DHL to allow for the use of ports other than Dover - Britain’s busiest and so most likely to be disrupted by any customs delays - and has authorised its supply chain team to make air freight bookings.

The government has said it will prioritise the movement of key supplies such as medicines if the flow of goods is hit after Brexit, so it is unclear what would happen to other items.

“We don’t have any assurances,” said Palmer. “One assumes if you’re putting parts onto a standard chartered plane, no one’s going to kick you off.”

POLITICIANS NOT DOING THEIR DUTY

Aston Martin, which built more than 6,000 top-end models last year at its central English plant in Gaydon, its only factory, is also holding a stock of cars in Germany.

“It’s an inventory to some extent that we put in place during the course of 2018 ... and depending on what happens in the next few weeks, may or may not increase,” Palmer said.

Carmakers fear their just-in-time production will grind to a halt if there are delays imposed after Brexit, but different manufacturers face different challenges.

Volkswagen Group (VOWG_p.DE), Britain’s favourite carmaker accounting for over 20 percent of sales, builds only 11,000 Bentleys in the country, while Ford (F.N) counts Britain as its third-largest market but makes no cars there.

Meantime Nissan (7201.T), which builds around half a million cars at its northern English Sunderland plant, and Toyota (7203.T) export the overwhelming majority of their British-built vehicles to the rest of the EU.

While mass-market brands are most worried about potential trade tariffs, smaller, high-end players such as Aston and McLaren believe their affluent customers could absorb extra costs and are more concerned about customs checks and delays.

Aston has hired John Griffiths, who has worked for Nissan and aerospace firm Rolls-Royce, as interim vice president for supply chain, in a role Palmer said “there was a nagging need (for) which has been confirmed with Brexit.”

Palmer criticised politicians on both sides of the Channel.

“Both the European and the UK politicians are not discharging the duty for which they are put in place which is basically to plan and bring certainty to allow the country to thrive,” he said.

As carmakers prepare for multiple Brexit eventualities, they are also dealing with stricter emissions rules and a slowdown in the world’s second-biggest economy, China, which has hit a variety of firms including Apple (AAPL.O).

While some automakers have reported falling demand, Aston, which has seen its share price fall by more than a third since it listed in October, said it had a record 2018.

“There has not been any downflow since those (Q3) numbers so in fact, broadly speaking, the opposite as we launched (sports cars) DBS and Vantage into China,” said Palmer.