Recently, the EU's antitrust agency approved PSA Group's proposal to acquire General Motors' Opel/Vauxhall car business, which produces Citroën, DS and Peugeot models. The merger applies to Vauxhall's manufacturing plant in the UK, which produces two of the ten most popular cars currently sold in the UK, the Astra and the Corsa.
This does not bode well.
This agreement, first announced a few months ago, will position Groupe PSA as the second largest automaker in Europe and serve as the basis for the Group's profitable growth around the world, we are told. It should be formalized later this year.
Carlos Tavares, Chairman of the Management Board of PSA, said: “We are proud to partner with Opel/Vauxhall and are deeply committed to continuing the development of this great company and accelerating its recovery. We respect all that the talented people of Opel/Vauxhall have achieved, as well as the company's fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall by capitalizing on their respective brand identities. Having already created winning products together for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and look forward to taking it to the next level. »
On the face of it, it all looks fine and dandy but, as seems likely, when the deal is fully finalized, the UK should rightly be concerned that the next word out of Tavares' mouth will be 'streamlining'.
The transaction will, they say, provide substantial economies of scale and synergies in purchasing, manufacturing, and R&D. Annual synergies of 1.7 billion euros are expected by 2026, a significant part of which should be delivered by 2020. These huge savings will have to come from somewhere. This is the part where I mention Brexit.
According to a recent press release, Groupe PSA delivered 1,580,000 units during the first half of 2017. Sales increased in Latin America, Middle East, Africa, Eurasia and India-Pacific regions. Market share gains were recorded for all new models, including the Peugeot 3008 and 5008 SUVs and Citroën C3 in Europe. Photo: PSA Group.
The specter of you-know-what eclipses this massive financial deal. At the moment, talks about the UK leaving the EU seem pretty hazy. The UK car industry should rightly be concerned. Inevitably, new vehicles in this conurbation will gradually convert to PSA platforms over the next few years, which may well spell the end of Vauxhall's manufacturing plants.
John Colley, professor of practice at Warwick (UK) School and noted expert on mega-mergers, was quoted as saying: "Carlos Tavares, managing director of Peugeot Citroën (PSA), has no no choice but to close the British Vauxhall factories at Ellesmere Port and Luton to manufacture the Opel (German brand) acquisition works. The cost of closing high-cost German factories will be at least triple that of British factories. Not only will they (PSA) have to appease the powerful German unions who have veto power over the deals, but the redundancy costs are around three times the UK level. »
Production Astra Sports Tourer at Vauxhall's Ellesmere Port Facility. Photo: Vauxhall.
As governments come and go, promises made by the UK administration are unlikely to be taken too seriously. What's more, with weary familiarity, the bullish leader of the UK's Unite Trade Union has already said he would 'not accept any loss of jobs' if the sale goes through, urging the UK government to reconsider its policy. with regard to the European single market. as the uncertainty is now clearly impacting the future of UK flagship companies, such as Vauxhall. It will go until the real mess comes.
As far as Britain is concerned, the whole shooting match is chaos and will no doubt remain so until the real mess comes further down the line. Although the UK government has committed to Brexit on the basis that in a national referendum a majority of the public has demanded that we leave the EU, their hearts are clearly not in it. And it is possible to feel the hot, fetid breath of failure; in short, it's not good.
At a time like this, the last thing UK industry needs is more uncertainty. The EU is taking a hard line which will probably be followed by the PSA group. In the longer term, the future of our Opel car manufacturing does not look good.
Geoff Maxted is an automotive writer, photographer and author of our Letter From The UK series. Follow his work on Twitter: @DriveWrite
Cover photo: Vauxhall.