German auto parts maker Schaeffler to close two UK factories

By Thomas Seythal and Edward Taylor

BERLIN/FRANKFURT (Reuters) - Germany's Schaeffler (SHA_p.DE) will shut two UK factories, prompted in part by Britain's planned exit from the European Union in March, the auto parts maker said on Tuesday.

The move, which puts hundreds of jobs at risk, comes a day after French tyre maker Michelin said it would close a Scottish factory and as time is running out for an agreed Brexit process, without which trade could be heavily disrupted.

Schaeffler, which makes ball bearings, said its factories in Plymouth, southwest England, and Llanelli in Wales would close over the next couple of years, with production shifting to Germany, China, South Korea and the United States.

Currently, 85 percent of the goods Schaeffler produces in Britain are exported, mainly to continental Europe, the company said. Access to export markets is under threat if Britain is unable to reach a deal with the EU over its departure.

The closure plan follows a review of Schaeffler's global production network that took into account future supply and demand, economic conditions, and decisions being made by carmakers, the German group said.

"Brexit is clearly not the single decisive factor behind our decision-making for the UK market, but the need to plan for various complex scenarios has brought forward the timing," Juergen Ziegler, Schaeffler's manager responsible for Europe, said in a statement.

The reorganisation will take up to two years to implement, Schaeffler said, and was criticised by UK trade union Unite.

"This is yet another body blow for the UK’s automotive supply chain and the wider car industry," Unite assistant general secretary Tony Burke said.

"It should leave no one in any doubt as to what is in store if the UK crashes out of the European Union without a deal that secures tariff free frictionless trade."

Unite said it was in negotiations with Michelin in the hope of striking an agreement which would ensure the financial viability of the Dundee factory in Scotland.

Schaeffler's decision comes as other carmakers and parts suppliers review investments in Britain, and warn of the damage that would result from a disorderly Brexit.

The German company employs around 92,000 people worldwide, including just over 1,000 in Britain. It did not say how many UK jobs would be affected by the closures, but a Unite spokesman said it had almost 300 members at the Llanelli operations alone.

Schaeffler said its plant in Sheffield, northern England, which makes clutches for cars and tractors and is its largest in Britain by revenue and workers, would survive.

It also said a logistics centre in Sutton Coldfield, central England, would see operations combined with those at a centre in Hereford, western England.

In Llanelli, Schaeffler makes mechanical tappets and bearings for the auto industry. It produces spindle bearings and machine parts and specialised bearings for the aerospace and defence industries in Plymouth.

A "no-deal" Brexit could mean tariffs of 10 percent under World Trade Organization rules that would add an average of 3,000 euros ($3,400) to the cost of British-built cars sold in the EU if fully passed on to buyers and add 1,700 euros to the cost of European cars imported into Britain, the UK's Society of Motor Manufacturers and Traders (SMMT) said in September.

Most German firms that export to Britain are poorly prepared for a no-deal Brexit, a survey by the IW economic institute showed on Tuesday.

(Reporting by Thomas Seythal and Edward Taylor, and Noor Zainab Hussain; Writing by Jason Neely and Edward Taylor; Editing by Mark Potter and Jane Merriman)