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Vauxhall’s future uncertain under new PSA ownership

By / 4 years ago / Latest News / No Comments

The future of Vauxhall has been thrown into doubt following the sale of parent company GM Europe to PSA.


GM has two UK-based factories – Ellesmere Port in Cheshire and the IBC plant in Luton.

Vauxhall, which sells cars solely in Britain unlike its pan-European Opel sister brand, is said by analysts to be vulnerable to the ‘speedy’ cost-cutting measures planned by PSA Group’s chairman, Carlos Tavares.

Announcing the acquisition yesterday (Monday), PSA said it expects to generate substantial economies of scale in areas of purchasing, manufacturing and R&D. Annual synergies of €1.7bn are expected by 2026 – of which a significant part is expected to be delivered by 2020.

Tavares said: “We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees.”

Britain’s exposure to the potential cost-cutting comes in the form of its two GM factories – Ellesmere Port in Cheshire and the IBC van plant in Luton which between them employ nearly 5,000 people. The former is home to the Astra and is feted for its efficiency – producing up to 148,000 Astra models every year. Its current production plan, which Tavares has promised to honour, expires in 2021.

The future of the Luton van plant is less certain, especially as the Vivaros it produces are made under a collaboration agreement with Renault – a key rival to PSA. Nevertheless, its production plan is not due to expire until 2024.

Analysts predict the UK could bear a significant brunt of the cost savings – more redundancies in France are unlikely after Tavares went on a cost-cutting drive to turn PSA around (nevermind the fact the firm is part-owned by the French state), while the German unions are seen as being significantly more influential than their UK counterparts. The uncertain future as Britain enters into Brexit negotiations with the EU is another hindrance.

Since news broke last month of the planned takeover, both the Unite union and the Government have been seeking assurances from PSA regarding the future of Vauxhall.

Unite general secretary Len McCluskey said: “I am determined that we can convince the new boss, Mr Tavares, that it makes sense for him to continue to build in Britain. Our plants are the most productive in the European operation, the brand is strong here, the market for the products is here, so the cars must be made here.

“But there is also a role for the Government to play. The uncertainty caused by Brexit is harming the UK auto sector. Wednesday’s Budget is a perfect opportunity for the Government to make it clear that it will preserve our trading arrangements and that it will invest for our auto sector’s future now, beginning with assistance for the reshoring of components.

“We need every assistance from the Government to give this sector a fighting chance. That absolutely includes committing now to securing access to the single market and customs union. This is the signal that the car industry needs in order to know that the UK government values this sector.”

Business Secretary Greg Clark added: “The Prime Minister and I have been in close contact with the PSA Group and General Motors and they have been clear this deal is an opportunity to grow the Vauxhall brand, building on their existing strengths and commitments.

“I have set out the Government’s determination to make the UK one of the world’s most attractive locations for innovative future vehicle technology, including electric vehicles and battery technology – a key part of our modern Industrial Strategy.”

As part of the takeover, GM in the US has agreed to honour all pension commitments for Vauxhall workers.

The firm’s GM Financial European unit will also be incorporated into a new company, jointly owned by PSA and the French bank BNP Paribas. Commenting on this, Chris Bosworth, director of strategy at Close Brothers Motor Finance, said: “There have long been rumours that BNP Paribas was looking to enter the motor finance market in the UK – clearly, today’s announcement of a strategic partnership with the PSA Group could provide a good platform for them to do this.

“It is interesting that the Banque PSA didn’t buy the business wholly on its own, as managing such a joint venture is not without its challenges. This is why, historically, manufacturers have tended to either stick with a captive finance house or use a bank as captive. Also of note was the valuation of 0.8 times book value, which would indicate that the book isn’t particularly profitable. Given that BNP Paribas will need to fully consolidate the entity it’s hard to see how this will be value accretive for their shareholders, unless they can leverage the platform to really grow in the market through other channels.”

Vauxhall also supports 23,000 jobs in its dealer network and 7,000 in its supply chain. Sue Robinson, director of the National Franchised Dealers Association (NFDA), said: “We will continue to monitor the situation on behalf of the 242 Vauxhall car and light commercial vehicle dealers we represent.

“We will be looking closely at the issue and, particularly, at the prospects and investments in the many Vauxhall dealerships which are nearly all privately owned and employ around 20,000 both directly and indirectly in associated jobs.”

SMMT chief executive Mike Hawes added: “We are hopeful that this deal will provide a positive future for the plants at Luton and Ellesmere Port and the wider supply chain given their inherent advantages. We have been encouraged by the active role Government has played reassuring investors of its determination to safeguard our competitiveness despite the uncertainty of Brexit.”

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Julian Kirk

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