“We don’t have any room to store increased stocks” says Hiroshi Seko, the UK MD of G-TEKT, a Japanese automotive supplier. According to the Nikkei newspaper, BMW have asked the automotive body work supplier stock 3 months’ worth of supplies for the Mini because of concerns about the impact of Brexit on supply chains, when normally they only hold around a week’s worth. G-TEKT imports 60% of the raw materials from France but does not actually have anywhere in their factories’ grounds to store these raw materials.
G-TEKT has just started up its fourth factory in the UK (2 in Gloucester, 2 in Wales), to supply Jaguar Land Rover and Toyota. It has increased employees from 568 to 808 over the past 3 years but is struggling to hire all it needs, particularly from continental EU, because of Brexit.
UK sales represent around 7% of G-TEKT’s global turnover, most of its sales in Europe. It has also just started to build a factory in Slovakia, again to supply JLR, from 2019.
Similarly, Takayuki Furuuchi the UK MD of Japanese automotive supplier Faltec, whose only production in Europe is their factory in Sunderland to supply Nissan, is also wondering if current lead times are sustainable. Faltec imports more than half of its metal materials from outside the UK and is worried that with a no deal Brexit, ithere will be difficulties in the logistics of supply of stainless steel from France and other EU supplier countries. These supply trucks pass through the Channel Tunnel to Dover. The Dover port authority estimates that a two minute inspection time would lead to a 27 mile tail back of traffic.
Faltec currently has a 2 day lead time from when Nissan orders the parts to when they expect delivery. Faltec is wondering whether it needs to adjust its procurement, but it has taken many years to build up a supply chain which meets car manufacturers’ rigorous standards and it will likely take a long time to make any changes to this.
According to a Japanese automotive supplier executive, “if there are logistical hold ups, then suppliers will just have to hold more stock”. Faltec is currently investigating holding stock at its own risk and whether there are any warehouses available nearby.
Nissan is starting production of its next generation SUV Qashqai for the European market from 2020. Expecting that suppliers will be expanding production as a consequence, the local authorities have given the go ahead for a new industrial park near the Nissan factory in Sunderland. But if chaos after Brexit affects the supply chain, there will be an impact on companies’ European strategy. Both Faltec and G-TEKT have been successfully expanding in the UK for over 20 years – Faltec increased employee numbers over the past few years in the UK, from 341 to 396. With UK sales at around 6-7% of turnover for both companies, they are not facing a huge hit on a global scale from Brexit, but as suppliers, they have to accommodate whatever car manufacturers request.
“It has been 40 years since Japan’s automotive industry first set up shop in the UK. The British automotive industry is facing a turning point, not just for car manufacturers but for parts suppliers who have invested so much time and money into the UK”, concludes the Nikkei.
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