Toyota says Brexit talks drift could threaten UK production

FRANKFURT (Reuters) - Deepening uncertainties over the direction and timetable of Brexit negotiations may force Toyota 7203.T to shift some UK production elsewhere if they are not addressed, the Japanese carmaker warned on Tuesday.

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Early government assurances that free trade with the European Union would survive Britain’s departure have been replaced by talk of transition periods, Toyota Executive Vice President Didier Leroy told Reuters.

“A few months ago the UK government was saying, ‘We’re sure we’ll be able to negotiate (a deal) without any trade tax,’” Leroy said in an interview at the Frankfurt car show. “They are not saying that any more.”

He added: “It’s clear that if we have to wait two to three more years to have a clarity on this topic, we will have a big question-mark about our future investment in the country.”

Brexit talks have become bogged down in recent weeks, with the EU’s chief negotiator saying not enough progress had been made to begin discussing a free trade deal, amid differences over the size of the “divorce settlement” London should pay. Britain’s car industry is increasingly anxious that its exports could face tariffs and other barriers after 2019.

PSA Group PEUP.PA boss Carlos Tavares sounded an impatient note on Tuesday, saying Brexit uncertainties were complicating integration with Opel and its British Vauxhall plants, acquired by the Peugeot maker from General Motors GM.N.

“Until we have more visibility on the trade dimension it’s very hard to define a strategy,” Tavares said in Frankfurt.

Jaguar Land Rover TAMO.NS, Britain's biggest automaker, also warned last week that Brexit was already deterring EU workers and suppliers.

Toyota announced plans in March to begin upgrading its Burnaston plant in central England in preparation for future models at a cost of 240 million pounds, after receiving written assurances from London.

But Leroy, Toyota’s top foreign executive, said the company could not wait indefinitely before deciding whether to build a new model at the site after production of the ageing Avensis model ends. Burnaston also builds the smaller Auris.

“We cannot take this kind of decision before we have clarity on the future trade relationship,” said Leroy.

“We will not close the plant tomorrow morning, but if in two to three years we have to decide some future investments, of course the key point will be the competitiveness of this plant in future.”

Leroy declined to say how much of the upgrade funds had already been spent, stressing that considerably larger sums would be needed to launch production of any new vehicles.

Without further investment, Burnaston’s output “will probably start to decline before we will be able to take a decision,” Leroy said. “The longer we have to wait, the more potential there is to move to another factory.”

He added: “We will not postpone a new product for three more years just because the negotiation is going to take three more years. So really there’s a strong need for us to have clarity as quickly as possible.”

(This version of the story refiles to fix Reuters Instrument Code in first paragraph)

Reporting by Laurence Frost and Agnieszka Flak; Additional reporting by Costas Pitas in London; Editing by Mark Potter