Reply to: Nissan halts investment plans

[vetran]

This is a variable naming convention.

ah Glaswegian Notation?

[meridian]

I think Carlos Ghosen actually said they are halting investment whilst they remain in the dark. I don't think they alluded to any particular outcome either way.

If you want to be pedantic about it, sure. If every permutation of Brexit made no difference to Nissan then they wouldn’t announce anything - clearly, there are possible permutations of Brexit that would result in Nissan halting investment.

Like I said, good luck though.

[Cirrus]

And yet, Nissan are reportedly halting investment plans if there is no deal..

I think Carlos Ghosen actually said they are halting investment whilst they remain in the dark. I don't think they alluded to any particular outcome either way.

[darmstadt]

Why do people write a statement like "profitability_is_important" with the underscore between words? Is it the new bolding or is it just a Scottish thing!?

Before computing was known as IT and populated by PFY's who can only work with WYSIWYG and can only operate a mouse, the way to highlight text as bold was to use _bold_

[meridian]

Why do people write a statement like "profitability_is_important" with the underscore between words? Is it the new bolding or is it just a Scottish thing!?

I’m on an iPad, and can’t be bothered remembering most of the bbcode tags to type them out manually.

[BlasterBates]

Why do people write a statement like "profitability_is_important" with the underscore between words? Is it the new bolding or is it just a Scottish thing!?

This is a variable naming convention.

[washed up contractor]

Why do people write a statement like "profitability_is_important" with the underscore between words? Is it the new bolding or is it just a Scottish thing!?

[meridian]

You're missing the perspective. Nissan is multi-national, not international.

Nissan might set up a car delivery organisation with hundreds of transporters. It might make annual returns on profit and loss but I'm sure you can see Nissan would not close it because it was losing money. It would just be a cog in the machine and any loss made by the subsidiary would be to the gain of the parent.

Nissan UK makes Qashqais etc most of which are exported. Nissan and Renault sell Quashqais but also many other imported vehicles. Sunderland's 'profitability' is irrelevant. What Nissan/Renault want to know is how the UK as a whole does. So they can make a loss on Sunderland (in Companies House/HMRC terms) that might help lower their overall CT etc. Obviously the motivation would be to release profits elsewhere, where they may be more useful or taxed less (yes transfer pricing still rules the roost). Brexit per se will add friction but the lower labour and UK sourced component costs (in euro) can compensate for this. Add to that a compliant workforce (who can be involved in playing one global union group versus another as they claw each other's eyes out to hang onto jobs) and you have a global justification for maintaining Sunderland whatever the local profit and loss accounts look like.

I’m pleased you know that Nissan is thinking of the U.K. group as a whole. And yet, Nissan are reportedly halting investment plans if there is no deal.

Sounds like Sunderland’s profitability _is_ important, to me. Good luck, though.

[Cirrus]

. Profitable in this sense is accounting, and includes tax breaks, depreciation writeoffs, and other incentives and costs. “Profits” for an individual manufacturing plant are generally not based on commercial / retail sales.

You're missing the perspective. Nissan is multi-national, not international.

Nissan might set up a car delivery organisation with hundreds of transporters. It might make annual returns on profit and loss but I'm sure you can see Nissan would not close it because it was losing money. It would just be a cog in the machine and any loss made by the subsidiary would be to the gain of the parent.

Nissan UK makes Qashqais etc most of which are exported. Nissan and Renault sell Quashqais but also many other imported vehicles. Sunderland's 'profitability' is irrelevant. What Nissan/Renault want to know is how the UK as a whole does. So they can make a loss on Sunderland (in Companies House/HMRC terms) that might help lower their overall CT etc. Obviously the motivation would be to release profits elsewhere, where they may be more useful or taxed less (yes transfer pricing still rules the roost). Brexit per se will add friction but the lower labour and UK sourced component costs (in euro) can compensate for this. Add to that a compliant workforce (who can be involved in playing one global union group versus another as they claw each other's eyes out to hang onto jobs) and you have a global justification for maintaining Sunderland whatever the local profit and loss accounts look like.

[LondonManc]

Doesn't actually make sense at all, of course you can run it like that and it will "work" but will be less efficient. In the end a world with protected markets is generally worse off and poorer. The main reason the US was wealthier and more successful than individual European countries was that companies had big markets to sell into, they had economies of scale and they could grow their companies easily. A UK centric company won't get very far. After the empire disappeared quite a few larger UK companies failed as their markets shrank. It was the EU that breathed life into the UK.

It makes more sense for countries to specialise and excel in some industry, so for example London banks do business all over the world and provide thousands of well paid contracts in the City. If every country retreats into its shell London becomes much smaller, then people end up in small companies just manufacturing for the UK, their budgets will be constrained and IT "folk" will take a cut in pay and hanker after the good old days of globalisation.

That relies on the world functioning as one rather than it does at the moment.

It's not in key peoples' interests for the world to work together.

[BlasterBates]

It looks like we're slowly moving to a position where manufacturers will have plants in their major markets and cheap labour plants elsewhere to cover the multitude of smaller markets. Makes sense.

Doesn't actually make sense at all, of course you can run it like that and it will "work" but will be less efficient. In the end a world with protected markets is generally worse off and poorer. The main reason the US was wealthier and more successful than individual European countries was that companies had big markets to sell into, they had economies of scale and they could grow their companies easily. A UK centric company won't get very far. After the empire disappeared quite a few larger UK companies failed as their markets shrank. It was the EU that breathed life into the UK.

It makes more sense for countries to specialise and excel in some industry, so for example London banks do business all over the world and provide thousands of well paid contracts in the City. If every country retreats into its shell London becomes much smaller, then people end up in small companies just manufacturing for the UK, their budgets will be constrained and IT "folk" will take a cut in pay and hanker after the good old days of globalisation.

[meridian]

I think I see why we can't get on the same wavelength.

Nissan (and Renault) do not primarily care whether Nissan UK is a profitable business. Quite possibly the reverse.

Nissan and Renault are global companies. Nissan Sunderland is just a cog in the machine. Two things are important: 1) how efficient is Sunderland as a cog, and 2) what are the tax advantages of making profits in one place rather than another. The UK is not bad for taxation but there are many incentives to make losses. The same goes for BMW and the others. Half the reason they manufacture here is because we are cheapish and compliant. The half other is they can offset profits from all their imports. (It looks to me that BMW sell about 250k cars in the UK, and make about 250k (of which 70k are sold on the UK Market))


No, FTA = no tariffs. No tangents. No 'negotiating strategy. Free Trade is free trade. Google it. Or write something here about what you think the difference is between the terms "Free Trade" and "Trade"

I understand what you’re saying now and mostly agree. Where we differ is in the complexities of the supply chain.

I don’t work for Nissan and they have never been my clientco, but I can take a guess based on the 5 other FTSE100 manufacturing companies I’ve contracted to.

Factories don’t generally sell stuff, they make it and transfer it to other sales orgs within the company (on the books, even if physically the stock is held in a near site warehouse). Through the use of supply chain finance, product costing, and transfer pricing their accountants can calculate whether a plant is “profitable” or not. Profitable in this sense is accounting, and includes tax breaks, depreciation writeoffs, and other incentives and costs. “Profits” for an individual manufacturing plant are generally not based on commercial / retail sales.

If the plant is not “profitable” in this sense then the company will consider winding it down or moving it. I agree that there are many other factors involved. But there is no sense in keeping a loss-making plant if the net effect at a group level is still a loss. This appears on the face of it to be what Nissan are indicating if there is “no deal” - the first step in this is to minimize investment, particularly in expansion and plant maintenance..

I would agree generally with your position if Nissan had unequivocally stated that they will continue their investment in the U.K. . They haven’t.

[LondonManc]

I think I see why we can't get on the same wavelength.

Nissan (and Renault) do not primarily care whether Nissan UK is a profitable business. Quite possibly the reverse.

Nissan and Renault are global companies. Nissan Sunderland is just a cog in the machine. Two things are important: 1) how efficient is Sunderland as a cog, and 2) what are the tax advantages of making profits in one place rather than another. The UK is not bad for taxation but there are many incentives to make losses. The same goes for BMW and the others. Half the reason they manufacture here is because we are cheapish and compliant. The half other is they can offset profits from all their imports. (It looks to me that BMW sell about 250k cars in the UK, and make about 250k (of which 70k are sold on the UK Market))


No, FTA = no tariffs. No tangents. No 'negotiating strategy. Free Trade is free trade. Google it. Or write something here about what you think the difference is between the terms "Free Trade" and "Trade"

It looks like we're slowly moving to a position where manufacturers will have plants in their major markets and cheap labour plants elsewhere to cover the multitude of smaller markets. Makes sense.

[Cirrus]

We're All Ears

Less profit for Nissan U.K.. if the margins are still okay and volume increases due to the lower GBP then there may still be a profitable business.

I think I see why we can't get on the same wavelength.

Nissan (and Renault) do not primarily care whether Nissan UK is a profitable business. Quite possibly the reverse.

Nissan and Renault are global companies. Nissan Sunderland is just a cog in the machine. Two things are important: 1) how efficient is Sunderland as a cog, and 2) what are the tax advantages of making profits in one place rather than another. The UK is not bad for taxation but there are many incentives to make losses. The same goes for BMW and the others. Half the reason they manufacture here is because we are cheapish and compliant. The half other is they can offset profits from all their imports. (It looks to me that BMW sell about 250k cars in the UK, and make about 250k (of which 70k are sold on the UK Market))

It was you that was holding up “no tariffs” as a possible negotiating strategy. If you’re saying that that is part of an FTA then you’ve gone off tangent without clearly explaining that that was what you meant.

No, FTA = no tariffs. No tangents. No 'negotiating strategy. Free Trade is free trade. Google it. Or write something here about what you think the difference is between the terms "Free Trade" and "Trade"

[meridian]

This is very confusing.

Labour costs may or may not remain the same in GBP (who gives a damn). If 80% of your labour costs are exported in the cost of the finished vehicle, then they go down in terms of your customers who pay in euro (mainly). I think the maximum EU tariff is 10% but so much of our cars are EU anyway I don't think that would apply, at least in full. By contrast the pound has gone down by 10% (order of magnitude) for UK added value so our cars already are cheaper to Nissan, Honda, Toyota and BMW.

You appear to be arguing that cars will be cheaper for the customer, who will be paying (mostly) Euro? If so, then I agree. Labour costs stay the same, sales price in GBP stays the same, imported components cost more. Less profit for Nissan U.K.. if the margins are still okay and volume increases due to the lower GBP then there may still be a profitable business.

FYI, I indicated it in my previous reply but you don’t seem to get supply chains or logistics. Nissan U.K. (probably) won’t sell direct to an EU customer or receive any commercial profit from the sale. The sale will likely be booked in the purchasing country, transferred via a logical plant in Netherlands, and only delivered from the U.K.. The EU sale will show up as an inter company transfer from the U.K. to NL and booked at the internal transfer price.

Well, what do actually think they meant when they said 'Free Trade' ? (Tip: Google is your friend) Australia tried free trade and - yes - all their car industry has gone.

Yes, I agree, but the context of this thread was Nissan withholding investment on the basis of “no deal”, which is definitely not an FTA. That’s why I said manufacturing would be destroyed. It was you that was holding up “no tariffs” as a possible negotiating strategy. If you’re saying that that is part of an FTA then you’ve gone off tangent without clearly explaining that that was what you meant.