Moody’s: “Credit negative for automakers” would result in more factory closures

A no-deal Brexit “will change operating landscape for global auto industry”, according to credit analysts at Moody’s. Specifically they report that they expect Japanese, UK and some German automakers will see profits hit due to 10 per cent auto tariff and through their exposure to production and trade disruptions. And, suggesting that we should expect further closures, they added that the news would affect “production strategies in the UK and across Europe”.

Mirroring what we have heard dozens of time from individual OEMs as well as the SMMT umbrella body, Motoki Yanase, a Moody’s vice president and Senior Credit Officer, said: “The UK production of these automakers is highly interconnected to the EU, and so a ‘no-deal’ Brexit will create a significant negative impact through various channels, most notably, the cessation of tariff-free automobile trade with EU countries”, adding: “In such a scenario, UK-made cars imported into the EU would face a 10 per cent auto tariff, in line with the taxes currently paid by non-EU countries”.

They predict that a no-deal Brexit would result in: “Further, additional time and documentation to clear customs [which] could require automakers to increase inventory levels, while higher unemployment in the UK, reflecting economic damage from a ‘no-deal’ Brexit, would contain wage pressures arising from weaker EU migration.”