PSA Group acquires Opel and Vauxhall in £1.9bn deal

6th March 2017
Alice Matthews

PSA Group, the French company that owns Peugeot and Citroën, has acquired Opel and Vauxhall as part of a €2.2bn (£1.9bn) deal to buy General Motors’ European unit. In a statement published today, PSA claim that thanks to the addition of these two manufacturers, which generated revenue of €17.7bn (£15.3bn) in 2016, it will become the second-largest automotive company in Europe, with a 17% market share.

GM Europe has endured 18 years of losses. In 2016 the division’s boss, Karl-Thomas Neumann, promised to attain growth, but the company ultimately reported a loss of $300m (£245m). Following the acquisition, GM and PSA expect to reach annual savings of €1.7bn (£1.47bn) in purchasing, manufacturing, and research and development by 2026. The majority of the cuts are set to be made by 2020.

Following the Brexit vote in June 2016, the deal raises fears of job losses in an already precarious UK economy. Vauxhall employs approximately 4,600 people at Ellesmere Port and Luton, with a further 20,000 working in the carmaker’s showrooms. Additionally, they support a further 18,000 supply chain jobs.

In response to these fears, PSA’s chief executive, Carlos Tavares, looks to be a safe bet. Since he took over at PSA in 2014, he has not closed a single factory. At a press conference in Paris, he stressed: “We do not need to shut down plants … We believe we need to trust the talents of people. They always come up with ideas and solutions we could not imagine … Shutting down plants is rather simplistic.”

According to Tavares, agreements that GM has previously made with the unions at Opel and Vauxhall are to remain honoured, which suggests that jobs at the Ellesmere Port and Luton factories will be safe until 2020.

On paper, therefore, the future of this alliance looks relatively bright. However not everyone is convinced that jobs will be retained, including the Leader of the Liberal Democrats party, Tim Farron: “There are bound to be cutbacks, and with the British government unable to guarantee car makers they will have access to the single market post-Brexit, the danger is that jobs will be cut in the UK rather than in Germany or France.”

In the short-term, the deal looks to be successful: GM Europe could make its first profit since 1999, research and development can be promoted and union deals are to be respected until 2020. The big question is what will happen after 2020. Following the acquisition, the PSA group now own 24 factories in Europe, a figure which is generally seen as too many.

Will the UK be able to encourage the factories in Ellesmere Port and Luton to stay open, or will Brexit make our exports just too unattractive? Only time will tell.

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