Reasons why Peugeot Acquires Vauxhall and Opel

French car giant PSA Group is to buy the European operations of General Motors, including Vauxhall in the UK, for €2.2bn (£1.9bn).

The announcement ends weeks of speculation about the deal and its impact on thousands of jobs at Vauxhall plants in Ellesmere Port and Luton.

As the terms of the deal become clear, the Unite union has called for assurances over the long-term future of the UK factories.

Ellesmere port

How many UK jobs could be affected?

The company employs 4,500 people in the UK. There are a further 23,000 people working in its retail and support operations, and 7,000 more in its supply chain whose jobs depend on the company’s presence in the UK.

Professor Christian Stadler of Warwick Business School warned that workers should brace for redundancies. “I would expect job cuts. PSA has done it before and there is no other way to realistically achieve the cost savings they have in mind, which might possibly mean plant closures as well.”
Why is PSA buying Vauxhall and Opel?

The deal will make PSA, which also owns Citroen and Peugeot, the second biggest car maker in Europe, with about 16pc of the market. It will now be bigger than Renault and second only to Volkswagen.

As with any merger, there are opportunities to streamline operations and save money. PSA boss Carlos Tavares has a reputation as a cost-cutter. PSA estimates synergies should reach €1.7bn on an annual basis (or 2.2pc of combined sales).
Why is General Motors selling?

The Vauxhall-Opel business hasn’t made a profit this century, and GM, which was bailed out during the financial crisis, is looking to retrench. The deal means it will withdraw from the European market completely.

US car makers are also under pressure from the Trump administration to keep plants and jobs in the US
In January, the President singled out GM for choosing to make a version of the Chevy Cruze car in Mexico. “Make in USA or pay big border tax!” Mr Trump declared.

So far GM has not shifted production back to the US, though rival Ford cancelled its plan to build a $1.6bn factory in Mexico in favour of a facility in Michigan. It denied this move was a result of Trump’s pressure.
Will PSA pull out of the UK?

The UK is still the second biggest car market in Europe, and the company has certain commitments to keep manufacturing in this country for the next few years.

The Vauxhall Astra is manufactured at Ellesmere Port in Cheshire in a contract that expires in 2021, with 80pc of the factory’s output sold to the continent under the Opel brand. Engines and the Vivaro van will be made in Luton until 2024.

Nonetheless PSA, which is around 14pc owned by the French government, will look very closely to see whether it can make its UK operations more efficient in order to drag them back into the black.

source: Telegraph

Ajayi Olasunkanmi

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