Vauxhall PSA Group: what you need to know

Vauxhall employs some 4,500 people at its plants in Ellesmere Port (Cheshire) and Luton (Bedfordshire) - image courtesy of Pixabay.
Vauxhall employs some 4,500 people at its plants in Ellesmere Port (Cheshire) and Luton (Bedfordshire) - image courtesy of Pixabay.

General Motors (GM) has today announced that it’s Opel/Vauxhall subsidiary will be sold to Peugeot and Citroën owner, PSA Group, for €1.3bn.

Dr Steven Barr, managing director of the Hennik Edge consultancy, discusses the implications of the PSA purchase of GM’s Vauxhall and Opel brands with editorial director of The Manufacturer, Nick Peters.

Who

General Motors (GM)headquartered in Detroit, Michigan, GM is one of the world’s largest automotive manufacturers by vehicles sold, with current brands including Buick, Cadillac, Chevrolet and GMC.

Bob Wright (left) and Terry Wright of UAW Local 5960 members work in the body shop at General Motors Orion Assembly Monday, June 22, 2015 in Orion Township, Michigan - image courtesy of GM
Bob Wright (L) & Terry Wright of UAW Local 5960 members work in the body shop at General Motors Orion Assembly – image courtesy of GM.

A success story for much of its more than 100 year-history, the current business – General Motors Company – was formed in 2009 following the bankruptcy of General Motors Corporation (GMC).

GMC is widely believed to have fallen victim to the automotive sector’s global downturn following the far-reaching financial crash in 2007-08, though the company had posted significant losses for several years prior.

The sale of Opel and Vauxhall was first proposed back in mid-2009, though the GM board decided not to pursue the decision at that time several months later.

GM is currently undergoing a pervasive restructure as it looks to rationalise its manufacturing capability, its dealership network and its brand holdings.

PSA Groupheadquartered in Paris, the French multinational automotive manufacturer of Peugeot, Citroën and DS is looking to further its journey of rapid expansion began in 2016.

Already this year, PSA has submitted a bid to acquire a stake in Malaysian manufacturer, Proton Holdings (which owns British sports car maker, Lotus), and announced a joint venture with Hindustan factory owner, CK Birla Group, a move which could see PSA selling its cars in India for the first time in three decades.

Lotus 3-Eleven Road version - front detail.
PSA has submitted a bid to acquire a stake in Malaysian manufacturer, Proton Holdings (which owns British sports car maker, Lotus – image courtesy of Lotus.

Last year’s third-largest European auto-manufacturer, PSA’s acquisition of the Opel and Vauxhall brands should see it become second-largest by the end of 2017 with a market share of 17%.

What they say

Chairman of the managing board of PSA, Carlos Tavares commented: “We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround.

“We respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalising on their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.”

GM chairman and CEO, Mary Barra commented: “For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum.

“We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility.”

Impact on UK manufacturing

Brexit Euro Pound Sterling Finance - Stock Image
The Vauxhall/Opel dialog could serve as a small-scale version of future Brexit negotiations.

Over the coming months, the UK (home to Vauxhall) will be caught between a veritable rock (France, PSA) and a hard place (Germany, Opel); with concerns that the dialog could serve as a small-scale version of future Brexit negotiations.

Vauxhall employs some 4,500 people at its plants in Ellesmere Port (Cheshire) and Luton (Bedfordshire), and in its warehouse and head office (both also in Luton). It also employs more than 30,000 people across its UK retail network and supply chain.

In the weeks since the take-over was rumoured, workers have been understandably tense, particularly as PSA is well-known to be looking to achieve huge cost-savings – in the region of £1.7bn (€2bn). The Group has said that job cuts won’t form part of said cost-savings, with improved production efficiencies being initially sought, and highlighted that it doesn’t have a history of closing plants.

Yet, both plants are already thought to be among some of the most efficient in the world. This presents a very real challenge for both Vauxhall management and the wider workforce. PSA’s Spanish plants have achieved considerable improvements by investing in automation, though such a move would appear to conflict with its UK aim of realising cost-savings.

PSA has said that will look to safeguard jobs until 2021, with the ongoing depreciation of sterling offering a potential competitive advantage for Vauxhall exports to overseas markets. In this respect, a so-called ‘hard’ Brexit – i.e. no UK-EU trade agreements – could strengthen this advantage due to the levying of import tariffs.

Exports Export Exporting Supply Chain Stock Image
There are pros and cons for Vauxhall in the wake of both a hard or soft Brexit.

Of course, there are always two sides to every coin and import tariffs could also increase Vauxhall production costs overall. A ‘soft’ Brexit would see Vauxhall continue to be exposed to the full competitive pressures of the market, much as it is currently.

In a statement released this morning, Business Secretary Greg Clark said: “Vauxhall has a long history of success in this country and we are determined to see that continue. The government welcomes the assurance by PSA that they will respect the commitments made by GM to Vauxhall’s employees and pensioners.

“We will continue to engage and work with PSA in the weeks and months ahead to ensure these assurances are kept and will build on the success of both sites for the long term.”

Clark added that the take-over represents an opportunity “to grow the Vauxhall brand, building on their existing strengths and commitments.”