Late last year, Schaeffler, a parts supplier to the automotive industry, announced that they planned to close two factories in Britain due to the uncertainty surrounding Brexit. They employ 1,000 workers in the UK across three factories and two logistics hubs and the two sites affected are in Wales and in the south west of England.
Schaeffler’s products are shipped across Europe and to other regions from their UK factories and they are keeping one open to supply the British industry once the dust has settled after the politicians have stopped kicking the Brexit football around. The company was concerned that tariffs would be imposed on exports from the UK into mainland Europe and other markets which would mean higher pricing for their customers.
Schaeffler was founded in 1946 by two brothers in Germany to make roller bearings – commonly used in the automotive and aerospace industries. Over the years it has absorbed other German industrial companies and then in 2008 it “acquired” Continental, the tyre company after the latter had over-extended itself just before the GFC buying some units of Siemens. The inverted commas are used because it was a stop-gap to help Continental survive a difficult period and over the last five years, Schaeffler has been gradually selling down their stake in that company.
Through their acquisitions, they have factories all over the world and so the products made in the two UK plants that are closing will be transferred to other factories in the Far East (China and South Korea) as well as Germany and the US. Clearly, these factories are in locations that can supply local car manufacturing without having extra tariff or logistics costs.
One of the factories makes bearings and parts for industrial usage and the other makes tappets and special purpose bearings for automotive use. The closures are part of the company’s “Agenda 4 plus one” which is their excellence program!
The closures will take up to two years, by which time Brexit will be (hopefully) sorted and the company may find that their modelled worse case scenario didn’t happen. If any of the jobs can be saved, that would be a good thing, however pure economics are part of this action – it will be cheaper to service the Far East from factories in that region.