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PSA to buy Vauxhall in €2.2bn deal

Uncertainty ahead as new owner predicts €1.7bn of savings.

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UK employees of Vauxhall are facing an uncertain future after French giant PSA agreed a 2.2 billion Euro deal (around £1.9m) to buy the brand and its German sister Opel.

The deal will see PSA Group, which owns Peugeot, Citroën and DS Automobiles, take over the running of Vauxhall and Opel from current owner, US giant General Motors (GM). The new group will be Europe’s second largest car maker after Volkswagen, overtaking the RenaultNissan alliance and having 17 per cent of the market.

However the deal leaves 4,500 UK Vauxhall workers, particularly those in the brand’s two plants at Ellesmere Port, Cheshire and Luton, Bedfordshire, concerned about their long-term job prospects.

Savings of €1.7bn

GM and PSA issued a joint statement announcing the sale and stating that the addition of Vauxhall and Opel is expected to “allow significant economies of scale and synergies in purchasing,” resulting in savings of 1.7 billion Euros by 2026 and a significant part as early as 2020.

GM decided to sell its European operations after missing a target for them to break even in 2016 after years of losses. The failure to hit the break-even target was blamed on Brexit – the UK’s decision to leave the European Union and the sharp fall in the value of the UK pound that followed the vote.

PSA believes it will “accelerate Vauxhall/Opel’s turnaround” with the group making a sustained operating profit of two per cent by 2020 and six per cent by 2026.

PSA buys Vauxhall
The sale agreement is significant for both PSA Group CEO, Carlos Tavares and GM CEO, Mary Barra, pictured at the press conference in Paris.

GM sees the sale as a significant step in its ongoing work to transform its business, which the company says has delivered three years of record performance and a strong 2017 outlook. However rumours continue to circulate in the US suggesting that GM may now merge with FIAT Chrysler Automobiles.

Commenting on the agreement, PSA head Carlos Tavares says that the group is proud to join forces with Vauxhall/Opel and deeply committed to continuing to developing the company and accelerating its turnaround.

Vauxhall Ellesmere Port
Uncertainty will hang over Ellesmere Port, a Vauxhall plant with a long history.

“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 capitalizing on their respective brand identities,” Tavares adds.

“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.”

“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,” Mr Tavares continues.

Vauxhall Vivaro
Vauxhall still has a major plant in Luton making the Vivaro van.

Wait and see on UK factories?

Vauxhall currently builds the Astra at Ellesmere Port and the Vivaro in Luton, as well as having its corporate headquarters in the Bedfordshire town. PSA has not built cars in the UK since closing its Peugeot factories in Coventry in 2006.

Brexit has added potential complexities for manufacturers with factories in Britain, particularly over exports that account for the vast majority of UK automotive production. Around 80 per cent of Vauxhall exports are to the European Union – there are fears that these could be badly affected by the export and import tariffs that will result if the Government does not secure an agreement to remain part of the single market when it leaves the EU.

Reacting to the sale announcement Len McCluskey, general secretary of the Unite trade union, insists that PSA head Carlos Tavares can be convinced that keeping production in Britain makes sense.

“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,” McCluskey says.

However he adds that the Government needs to play its part to end the harm being caused to the UK auto sector by the uncertainty over Brexit. He insists that the Budget on Wednesday would be a perfect opportunity to announce that trading opportunities with Europe will be preserved.

The current Astra is expected to continue in production until at least 2021 and relocating its manufacturing plant before then would seem to be unlikely. However around three-quarters of the car’s components are sourced from the EU so PSA could decide to base future Astras on the same platform as Peugeot Citroën models, building them together in European factories.

New UK plants?

Some reports suggest, however, that a ‘hard Brexit’ could be good news for Vauxhall manufacturing in the UK. PSA could decide to overcome the inevitable tariffs resulting by relocating some production to Britain in order to supply the UK market, which is one of the strongest in Europe and in which Vauxhall has a significant 16 per cent share.

Tavares has appeared to confirm such reports, sating that there could be an opportunity to open new plants in the UK.

Vauxhall/Opel and PSA already co-operate on several models. The Vauxhall Crossland X and Grandland X crossovers, launching at the week’s Geneva motor show, are built on the same platform as the Peugeot 2008 and 3008 equivalents. The Vivaro van, however, is part of a joint programme with PSA’s great rival Renault-Nissan, sold by the latter as the Traffic and Primastar.

The Car Expert will update this story as more details emerge.  

Vauxhall Crossland X 02
The forthcoming Vauxhall Crossland X SUV is built in a joint project with PSA Group.

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Andrew Charman
Andrew Charman
Andrew is a road test editor for The Car Expert. He is a member of the Guild of Motoring Writers, and has been testing and writing about new cars for more than 20 years. Today he is well known to senior personnel at the major car manufacturers and attends many new model launches each year.