The takeover by French carmaker PSA Peugeot Citroen of General Motors’ Opel-Vauxhall is set to transform the European car market.
Announced by the bosses of the two companies on Monday, the 2.2 billion euro deal means GM gets rid of a division that has posted losses totaling around 20 billion euros in the last 17 years.
PSA’s hope is that by combining with Opel-Vauxhall it will gain more scale in Europe as it fights for market share in a fiercely competitive market.
By acquiring Opel, PSA leapfrogs French rival Renault to become Europe’s second-ranked carmaker by sales, with a 16 percent market share to Volkswagen’s 24 percent.
Chief Executive Carlos Tavares pledged to turn around Opel-Vauxhall as he did PSA. He told reporters: “We want to create a European automotive champion from the combination of a French and a German company. We are indeed committed to these two iconic brands with their respective German and British heritage.”
“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” he added.
PSA (@GroupePSA) March 6, 2017
No plant closures
PSA’s plan is to save money not by closing plants but by consolidating purchasing along with research and development as the Opel lineup is redeveloped with PSA knowhow.
The problem is overcapacity, which long term can only be solved by cutting production and jobs.
The German government is keeping a close eye on the situation.
German Economy Minister Brigitte Zypries said: “What is important now is to create further transparency until the negotiations are finalised, to further engage the unions and the management at Opel in order to achieve a good outcome for Opel in Germany.”
PSA reiterated pledges to run Opel as a distinct German subsidiary and honour existing job guarantees to unions, which tend to cover production plans for existing models.
Beyond those horizons, however, the outlook for Opel plants may be less certain.
“Tavares wants to create healthy competition between the plants,” one person involved in the discussion told the Reuters news agency. “They will be competing for workload.”
Vauxhall most vulnerable
Vauxhall is seen as most vulnerable to plant closures because of the future complications from Britain leaving the European Union.
But Len McCluskey, the head of the British trade union Unite, was optimistic about UK plants getting new models to build.
He said: “What is being said at the moments by PSA Peugeot Citroen is that they are going to honour all of our agreements. Now, that means that the current model at [the UK plants] Ellesmere Port and Luton will continue. But, the real challenge to us is to make certain that we get new models, and that is about going forward, making sure that we have a future – a long-term future for our plants.”
He added: “It is critically important that Vauxhall production remains with the UK.”
PSA’s boss dismissed worries about a “hard” Brexit which would mean the UK losing its current trade advantages. Tavares said Vauxhall could then build cars using more British parts: “If it is a hard Brexit, perhaps, in terms of strategy, it is going to be a very nice opportunity to be able to source the UK from the UK.”
But he did concede: “This may look to you a little bit romantic.”
For the UK government British Business Secretary Greg Clark said: “The context clearly is nothing to do with Brexit. This is a restructuring of the organisation. And in my discussions with PSA, actually the chief executive has said today that Brexit isn’t an essential driver of this, and we want to have the best possible trading relationship with Europe, but in any event Carlos Tavares has said there are opportunities post-Brexit.”
What Vauxhall workers are saying
- “It’s obviously nervous times for everyone. You’ve just got to stay hopeful, haven’t you. Hopefully Peugeot, hopefully they will want to keep a working relationship with ourselves.”
- “Yeah, concerns about the safety of the plant and our jobs but we’ll just have to wait and see what happens and hopefully PSA will keep us going.”
- “I think it’s the uncertainty that these things always bring. It’s as simple as that, it’s the uncertainty. Peugeot had factories in Britain before and closed them, so who knows.”
- “Smashing, just got a few months to learn French, haven’t I?”