The PSA Group, maker of Peugeot and Citroen cars, are rumoured to be in the process of buying General Motors’ (GM) loss-making European business Opel. Should a deal come to light, it will most certainly involve British based manufacturer Vauxhall, which currently has staff in the region of 4,500 in two UK based plants. Opel currently employs around 35,000 people in Europe with plants in Spain, Hungary, Austria, Poland, Russia and Germany while over 60,000 work in the retail and related sectors of both brands.
An Opel/Vauxhall takeover would see GM exit the UK and Europe and should the PSA Group become the owners, it would make them Europe’s second-largest carmaker – behind VW – with a 16% share of the European market. French rivals, Renault-Nissan, are currently Europe’s second biggest carmaker.
The main shareholders in PSA are the French state which holds a 14% stake in PSA, as do the Peugeot family and Chinese firm Dongfeng Motor.
PSA and GM have not denied that the acquisition is a possibility, but both sides have said that it is not certain if an agreement will be reached.
Until December 2013, GM had a 7% stake in PSA and in the same month, sold its share for £250m following a number of unsuccessful collaborations with both manufacturers. The damage to revenue for PSA was so substantial that it led to a bailout from the French government and Dongfeng.
In 2009, also following a bailout by the US government, GM came close to selling German-based Opel, but changed its mind in order to retain a strong presence in Europe. However, that policy now seems to have changed and there are fears that although the new owners will want to maintain the bulk of the European Operation, big questions will be asked about continuing with the smaller market Vauxhall and its plants in Luton and Ellesmere Port.
The rumour of a buyout comes after GM reported losses in the region of $257m from its European operations alone last year. That was the 16th loss-making year in a row for GM in Europe, and resulting in a total of more than $15bn in losses for Europe since 2000.
UK union leaders are already calling for talks with GM bosses and with the imminent arrival of Brexit, the possibility of a French owner prioritising their newly purchased continental plants over the non EU British plants must be taken seriously. While it may be beneficial to continue with manufacturing of vehicles in the UK against harsh import tariffs, the recent loss making history of Vauxhall will be the main focus for the PSA accountants and, as in all big corporate takeovers, those who don’t preform are usually the first for the chop.
Vauxhall has had a loyal following for many decades in Britain and it is that loyalty that has ensured the survival of the brand that long ago sold its independence. But the market across the world has been changing dramatically and middle segment car manufactures are feeling the pinch more so than those with a more specialised pedigree or a long chain of quality engineering developments. The future of the car is moving away from the standard production line, new model every 5 year plan with many of the brands looking into long term leasing, sub divisions of pedigree names and even more focus on customer personalisation.
It will require a massive commitment from PSA to keep the heavily unionised UK workforce happy and as past failures such as Rover has shown, if you are not partnered with one of the big players, your future is almost certain to be short.
The next 12 months will be interesting for European vehicle manufacturing.