Britain's luxury carmakers prepare for worst as Brexit looms

[NEW YORK] Aston Martin and Bentley Motors saw this crash coming - but it's still going to sting.

Speaking onstage at a conference in Detroit before and after the British Parliament rejected Prime Minister Theresa May's Brexit deal, the chief executive officers of two companies synonymous with UK carmaking had been bracing for disaster. Both have been making arrangements to do what they can to avoid problems with their supply chains.

"I've done what any sane person would do: I've assumed the worst," Aston Martin CEO Andy Palmer said on Tuesday at the Automotive News World Congress, which coincides with the Detroit auto show. "I've assumed we'll crash out of Europe, and in consequence our supply chain will be disrupted."

Aston Martin Lagonda Global Holdings plc's board before this week authorised contingency planning for Brexit that included shipping car components via air freight to allow for the use of ports other than Dover, which faces potential chaos in a no-deal scenario. For the last eight months, Volkswagen AG-owned Bentley has likewise supplied some parts through an alternative port, CEO Adrian Hallmark said at the conference.

"I may have to eat these words - we are prepared," Mr Hallmark said.

Following Tuesday's vote in Parliament, BMW AG and the German car industry group VDA issued grave warnings of the fallout from a so-called hard Brexit. BMW, which owns two iconic English brands - Rolls-Royce and Mini - said that the uncertainty of UK and EU trade relations are "greater than ever" and that it has to prepare for the worst.

A no-deal Brexit looks increasingly likely and would have "severe consequences", VDA president Bernhard Mattes said.

The drag from the looming deadline is already coming through to weigh on the region. Last year, annual car sales in Europe dropped for the first time in five years, led by a sagging UK market where consumers spooked by Brexit delayed buying big-ticket items like cars. Registrations in the UK fell by 6.8 per cent last year, the steepest annual decline since the financial crisis.

The only way for the UK to stay in the EU appears to be another referendum, Aston Martin's Mr Palmer said, and that would create constitutional issues. His fear is the only other alternative is for the UK to leave by crashing out of the EU, which almost certainly would cause major issues with car parts crossing borders.

"For us, we've had to say, whatever happens, it's a no deal," Mr Palmer said. "And any news that improves on that is welcome. And that's all you can do."

Continental AG, the second-biggest car parts supplier, has a team of about 100 people dealing with the potential Brexit fallout, including a no-deal scenario, chief financial officer Wolfgang Schaefer said on Monday. The parts maker is shipping some components into the country ahead of the looming exit date to cushion against possible supply bottlenecks.

Volkswagen, which has boosted inventory levels in its second-biggest market in Europe, said open-market access and clear customs processes were paramount to the industry.

"Any further delay in the Brexit decision-making process poses a risk to investments and jobs in the automotive industry which relies on long-term planning security with development cycles of up to five years," the world's biggest carmaker said in a statement.

BLOOMBERG