BMW Could Move the Mini to Germany Because of Brexit – Fortune

Posted: Tuesday, February 28, 2017

BMW Group is thinking of moving production of the next Mini, an icon of British car making, to Germany because of the U.K.’s determination to quit the EU and its Single Market.

Cue another round of wailing and gnashing in Britain over the self-inflicted wounds of Brexit. But there may be more to the report than meets the eye.

The German daily Handelsblatt reported earlier this week that the Munich-based group wants to build the new, all-electric version of the urban runaround car at one of three factories on the continent, in order to avoid any future tariffs and other customs-related hassle if, as many fear, the U.K. ends up leaving the Single Market without a deal to regulate such things.

There is some logic to the idea: The EU market is much larger than the U.K. one, and the Cowley plant outside Oxford, where Minis have traditionally been built, is geared to making conventional vehicles powered by combustion engines. The Countryman, Mini’s only plug-in hybrid, is made in Born, Netherlands, and runs on powertrains and batteries made in Germany. BMW currently makes all its i-series EVs in Leipzig in the state of Saxony.

The reports are also consistent with the general pressure on the U.K. auto sector, which has thrived in recent years under foreign ownership, but which now risks being handicapped in any future investment decisions by companies that have no emotional reason to favor their U.K. plants over those elsewhere in Europe. This is why GM’s two plants in the U.K. appear to be the most vulnerable to closure if General Motors sells its European operations to France’s PSA Group.

“We go through this process of deciding with each and every new model variant,” a BMW spokeswoman in Germany said. “We have to look at a variety of factors to make sure that we’re building it in the place that makes the most sense.”

But, as that comment suggests, Brexit isn’t the only pressure, and the timing of the report has appeared suspicious to some. BMW announced last year that it would take an investment decision by the end of 2017 and hasn’t changed that line. So why is Germany’s most business-friendly paper trailing threats like this right now?

Cynics suspect it is tied to a dispute over Mini’s pension plan, which has been brewing for months, but which is coming to a head now. The Unite labor union held a “consultative” ballot on strike action in December that was supported by over 90% of those who took part. A spokesman for Unite said the changes proposed to the scheme, which offers defined benefits tied to employees’ final salary levels, will deprive the average 50-something of some 70,000 pounds ($97,000) in pension income. An employee in his or her 30s could lose twice as much.

The union is particularly unhappy that this is happening at a time when BMW is making record profits, and Mini is posting record deliveries.

“BMW can well afford to honor its pension promises,” a Unite spokesman said. “Our members have contributed very significantly to those sales and profits.”

“The two things are very separate,” a spokeswoman for Mini in Oxford told Fortune. “We have been looking at the pensions issue even before the Brexit referendum took place.”

That’s as may be. But will the union be able to push its case as vigorously as it otherwise would, if the threat of Brexit, and the gradual death of the Cowley plant that could follow it, weren’t hovering over it like the sword of Damocles? It seems unlikely.



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