Friday 31st March 2017
Why does Peugeot want to buy Vauxhall and what could the deal mean for customers and employees?

The PSA Group has been looking to own Vauxhall for many years, and the deal has finally gone through. But what does this mean for Vauxhall?

Rob Hull, The MailOnline, reports:

Signed, sealed and delivered. It has been confirmed that Vauxhall will become a French-owned brand.

That deal marks the end of 92 years under American ownership for the British car badge with PSA Group, the owner of Peugeot and Citroen, securing a £1.9 billion deal to take Vauxhall - and the Opel business in Europe - out of the hands of US giant General Motors.

The deal still depends on regulators and if it passes it is expected to be concluded towards the end of this year.  But why has it happened and what does it mean for the future of Vauxhall, its employees and its customers?

PSA Group is now number two in Europe

The PSA Group, which currently oversees Peugeot and Citroen, will hand over €2.2 billion for GM's European operations, with the transaction split €1.3 billion for Opel and €0.9 billion for Vauxhall.

As a result of the takeover, the PSA Group can now call itself the second biggest automaker in Europe, leapfrogging Renault to have a 17 per cent market share in the continent. Only the VW Group has more of a stronghold in the EU.

Last year, Vauxhall and Opel sold 985,500 vehicles in Europe. The PSA Group - with the combination of Peugeot, Citroen and DS - shifted 1.4 million cars. Adding to two together takes the combined total to almost 2.5 million registrations.

That might be a whole 1.1 million behind the heavyweight Volkswagen business, but it eclipses French rival Renault which sold 1.5 million motors combined with its Dacia enterprise in 2016.

Costs will be cut for the French automaker

The buyout will mark a significant change for Vauxhall products you can buy on the market in the future.

While the familiar names, like the Corsa, Astra and Insignia, will most likely be retained, expect to see them switch over to PSA platforms. 

That means the Corsa could soon have a similar engine range to the Citroen C3, the Astra might drive like a DS 4, and the Insignia will feel akin to the Peugeot 508.

Volkswagen has proved how successful this shared-parts and platform formula is. 

While models like the VW Golf, Seat Leon, Audi A3 and Skoda Octavia ultimately use the same mechanical parts, the group positions the brands differently in the market space and offers each marque with a unique identity. 

Low manufacturing costs and big revenues is the result.

PSA will want to do the same, and buying General Motors' European network is its best way to do that.

That's because the French auto firm knows the scale and quality of the operations it is buying.

It had already previously worked with General Motors on current SUV models built for the European market (the Peugeot 2008-based Vauxhall Crossland X and the Peugeot 3008-based Vauxhall Grandland X), so they may well have already identified manufacturing strategies and best protocol for sharing components across a five-brand auto business.

The transaction includes all of Opel-Vauxhall’s six assembly and five component-manufacturing facilities, one engineering center (in Rüsselsheim, Deutschland) and approximately 40,000 employees.

UK jobs are uncertain

What all this means for the UK manufacturing plants in Ellesmere Port and Luton is still unknown.

We expect to have updates on this as PSA announces plans in the coming months, though PSA - especially under current chief executive Carlos Tavares - has previous form for being ruthless when it comes to employee cuts.

The French firm closed its last British factory - the Peugeot plant in Ryton, Warwickshire - in 2006 with the loss of more than 2,000 jobs.

It has also axed 15,559 jobs in its automotive division between 2013 and 2015 – with many of the losses coming under the tenure of Tavares, 58.

He took over at PSA in 2014, as it had faced down ruin in the wake of the financial and eurozone crisis and took a French state bailout, and he has won praise for turning one of France's biggest manufacturers around.

The latest figures from the company show staff numbers in its automotive division fell from 111,228 in 2013 to 95,669 in 2015, and that there were further job cuts during 2016. 

A spokesman for union Unite said they had set out their position when they met with PSA Group bosses two weeks ago, and that the group seemed ‘union-friendly’.

Vauxhall currently employs 4,500 staff at two UK-based facilities with 7,000 more working in the supply chain and around 20,000 in Vauxhall dealerships.

PSA has already said it will honour all existing Opel-Vauxhall agreements, which should include manufacturing of the Astra at the Ellesmere Port plant until 2021 and the Vauxhall Vivaro van in Luton until 2025.

Knowledge is power in today's car world

PSA Group has made the transaction during arguably the biggest shift change in the automotive industry's history.

Electric and low-emissions vehicle development and autonomous driving technology are set to completely reform what the world's cars are like, and manufacturers have a big job on their hands to keep up in this fast-developing market, especially against tech giants like Apple and Google.

PSA will now have a better understanding of the direction Opel-Vauxhall and General Motors was going with its plans, and will ultimately pick up plenty of knowledge as part of the deal.

That said, it hasn't got its hands on everything. General Motors has retained part of the European business in Turin, Italy, which looks at both diesel engine development and connected cars - so there's some information GM might not want leaked to rivals just yet.

PSA Group has proved it can be profitable

Opel-Vauxhall has had plenty of issues around the profitability of its business, which might be one of the reasons General Motors has been willing to let it go to a rival that isn't going to trouble it in the US market space.

And the deal could prove to be a win-win for both automotive groups, with PSA proving in recent years that it can turn a fledgling vehicle company into a profitable powerhouse.

With Tavares at the controls, PSA has been increasing its profit margins year-on-year since 2014, restructuring the business and developing the identity of each of its brands along the way.

It can now take the same acumen and boost the volume of growth by accelerating the profitability of Opel-Vauxhall through the one million customers it already has on the European market each year.

But it has inherited some issues too, not least the recent Zafira MPV fire problems that have blemished Opel-Vauxhall's reputation in the last 18 months or so.

New ownership can mean a new lease of life 

Individual carmakers being taken over by emerging automotive groups has proved very successful in recent years - just look at the roaring success of Jaguar Land Rover under the watchful eye of Indian owner Tata in the last decade.

Volvo, under Geely's ownership, and Dacia, which is now a Renault product, have also had a new lease of life as part of being brought under the wing of bigger manufacturing groups.

While this doesn't necessarily guarantee Opel-Vauxhall's future success, it does show there's a formula in place for products to be tailored to consumer needs - proving hugely success with the changes too.

If PSA gets it right, Vauxhall cars could be improved products in the not too distant future, and that means they'll also be easier to sell.

But the deal hasn’t gone through yet. The PSA Group have made a statement claiming: 'The transaction is expected to close in the fourth quarter of 2017 and is subject to customary anti-trust and other regulatory approvals.' So, it seems we still have a little while to wait.

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