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Airbus, BMW and Siemens Comments – Brexit Establishment Fights Back! By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

 

 

 

So Airbus, quite rightly in my view, called for urgent clarity on Friday in respect of Brexit related issues making perfectly clear its fear that unless a deal is reached between the EU and UK negotiators very soon, its business operation and competitiveness will be negatively impacted.

Once again, Airbus made what to my mind was a very sensible suggestion that in order to provide more time for everyone concerned the already agreed transition period should be extended beyond the end of 2020. And yes, the company also gave a veiled threat that unless it gets the clarity it needs very soon it may have to reconsider its longer term options.

At no time was there a suggestion that Airbus might suddenly close its plants here in the UK and move them across to Continental Europe or anywhere else. True, Airbus confirmed that it will not be making any immediate new investment here in the UK until it has the necessary clarity over future customs clearance of parts and components that move between the various plants in France, Germany, Spain and the UK. That, along with the vexing issue of tariffs, product certification and regulation is all that Airbus is as far as I am aware asking for.

However, critics were quick to suggest that Airbus was holding a gun at the UK government demanding of funding if it was to continue operating in the UK. What nonsense this was. Press and media got itself into a frenzy of activity and exaggeration it seems became the order of the day. Some even suggested that they [Airbus] wanted to move wing production to China and America. Well let me reassure them, no that is certainly not the case.

Airbus is here in the UK and it is probably here to stay but like all companies large and small, its operations here have to be cost effective and competitive with those elsewhere. While the hope is that it will not, the fear is that Brexit may interfere with the status quo. And let us not ignore the many fears expressed by Airbus CEO Tom Enders during the run up to the Brexit referendum vote and the shock and despair he felt over the way that the vote had gone. That view is of course shared by the majority of large corporates operating in the UK even if, it seems, not by the majority of those that work in them.

Apart from putting a few ideas forward in relation to transition period extension and calling for clarity and speed, all that Airbus Chief Operating Officer Tom Williams was doing on Friday was warning that until a Brexit deal covering its main concern had been agreed by the UK and EU Airbus needed to keep all of its options open.

In the meantime, because the company operates on the basis of a ‘just in time’ process Williams confirmed it had decided to increase the stock of parts that it required in order to continue its business operation albeit that this was a very costly process to undertake.

Interviewed on the Andrew Marr show yesterday, Secretary of State for Health, Jeremy Hunt hit back at Airbus and other large corporates over the various Brexit related warnings last Friday and what he described, as the ‘threats’ deeming these to be completely inappropriate. Mr. Hunt went on to suggest that businesses sounding the alarm about potential job losses [as a result of Brexit] were undermining the Prime Minister, Theresa May. NO, Mr. Hunt, all they want is sufficient clarity that will allow them to continue to do what they do well, remain competitive and plan for the future.

Airbus has not been alone expressing concerns about what happens post Brexit and with little more than nine months to go before the UK leaves the EU it is hardly surprising that with the urgency of need for clarity and quite possibly, the need to extend the transition arrangement beyond the end of 2020, the voices of concern are growing larger. BMW which manufactures the Mini at its Cowley, Oxford plant and is a large exporter of cars to the EU area as well not to mention being a large importer of cars sold in the UK domestic market together with Siemens which makes a range of products including wind turbines, trains and much else besides here in the UK have all stressed the urgency of need for clarity in order for them to plan for their respective business operations.

Without actually naming Mr. Hunt personally, Minister for Defence Procurement, Guto Bebb MP whose constituency in Aberconwy, North Wales happens to be not that far from the huge Airbus wings plant at Broughton, lambasted various remarks made by senior cabinet ministers by saying that “The dismissive attitudes shown towards our business community by senior Cabinet ministers is both unworthy and inflammatory”. Mr. Bebb went on to say that “Business wants a good deal and so does the government. Do the leadership aspirations of multi-millionaires trump the need to listen to the employers and employees of this country”?

Over the past two years I have chosen but rarely to enter the Brexit debate. I have my views of course but I have always accepted the so-called will of the people. Whilst admitting to a personal preference that we should remain part of the EU, for the most part of this torrid affair I have chosen to stand outside from the main debate. Yes, there has never been any doubt where I stood of course but never, for instance, have I called for another referendum or been seen to actively support remainers.

Nevertheless, from a handful of those on my list wedded to Brexit I too got it in the neck so to speak following the piece that I wrote on Friday under the title ‘Last Chance ‘Brexit’ Warning from Airbus to the British Government’. Below was a typical response:

“In the case of Airbus you seem to accept the Company’s case with little discernible objective criticism. I have taken the trouble to read the full Airbus Risk Assessment and note that, in the final analysis, the company has two major issues:

 

  1. The possibility of tariffs – leading to increased pressure on margins.
  2. QA and product certification issues – leading to increased expenditure on stock holdings to overcome established ‘Just in Time’ supply chain practices should there be hold ups. 

 

Like so many other issues connected with BREXIT these specific issues are as much in the hands of the EU Commission as the UK Government. The latter would be happy to consider a deal but the methodology of the EU is not to suggest anything themselves but to keep asking what UK wants so that they can turn it down with offhand remarks and clever asides.   

 

Where is Airbus in all this? Have they approached the EU seeking reasonable terms for the UK given that Airbus is, as you and they say, a multi-national company and that messing about with its corporate structure will have effects beyond the UK?

And, a good reason not to move production facilities, is that there will be major cost and efficiency penalties if Airbus were to move some or all of its manufacturing from UK to mainland Europe. Is this even possible in the short to medium term? I even heard one commentator on the BBC this AM suggesting that Airbus could move some of their UK business abroad to the USA. 

 

In the final analysis a business represents itself and its shareholders by maximising profits, nothing more. The democratic will of the British People is not mentioned by Airbus (or you) in the Risk Assessment – only HMG’s need to negotiate”.  

 

Now, I am broad shouldered enough and very happy to take criticism from anyone. The above written email is a view and it is one that I can respect. I just don’t happen to agree with some of the points. Yes, I am quite sure that Airbus has been talking to the EU authorities in Brussels just as I know that it has been talking to the UK government. Look at it another way and remember that Airbus as a company is doing very well and it needs to increase its manufacturing capability in order to make more planes. Rising demand is a big issue for Airbus just as it is also for Boeing in the US. But ask yourself this, with the lack of available clarity over Brexit, would any senior company management of a company that operates, as Airbus does, as a manufacturing partnership spread across four countries and many plants dare go to its shareholders and say we are going invest more in the UK? Certainly not yet I suggest but perhaps, as soon as the clarity they require is available, such will I am sure remain a distinct possibility if the competitive argument can be won.

 

My correspondent above is right of course to suggest that moving out of the UK would be very costly. It certainly would and that in my view is just not going to happen. But as to whether Airbus invests more in the UK and seals the long term future of its wing making centre of excellence is firmly in the hands of UK and EU negotiators. Without pointing a gun at the head of anyone and demanding only that its voice is heard, Airbus is merely saying get on with it and give us the clarity that we need.

CHW (London – 25th June 2018)

Howard Wheeldon FRAeS

Wheeldon Strategic Advisory Ltd,

M: +44 7710 779785

Skype: chwheeldon

hwheeldon@wheeldonstrategic.com

@AirSeaRescue

  

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