PSA agrees to buy Vauxhall and Opel from GM: What happens to UK jobs now?

Rebecca Smith
Vauxhall workers in the UK have been waiting for news of their future job outlook
Vauxhall workers in the UK have been waiting for news of their future job outlook (Source: Getty)

French firm PSA has confirmed its €2.2bn (£1.9bn) deal to buy General Motors' European unit, including Vauxhall.

And all eyes have been on PSA boss Carlos Tavares, who has a reputation for being an efficient cost-cutter, for clues as to what it will mean for jobs. Vauxhall's UK plants in Luton and Ellesmere Port employ 4,500 workers.

Read more: PSA agrees €2.2bn deal to buy Vauxhall owner's European operations

Vauxhall jobs in the balance

The French car firm has been making placating noises so far. Today PSA said it was committed to capitalising on both Opel and Vauxhall's "respective brand identities" and Tavares said on a call with analysts that closing factories was a "simplistic" solution.

"Our plan is to build a common future for Opel and Vauxhall, and fix the existing issues," he said, though he didn't go as far as saying all current plans will remain open.

The government's take: "This deal is an opportunity to grow the Vauxhall brand"

Business secretary Greg Clark said: "Vauxhall has a long history of success in this country and we are determined to see that continue. The government welcomes the assurance by PSA that they will respect the commitments made by GM to Vauxhall's employees and pensioners. We will continue to engage and work with PSA in the weeks and months ahead to ensure these assurances are kept and will build on the success of both sites for the long term.

"The Prime Minister and I have been in close contact with the PSA Group and General Motors and they have been clear this deal is an opportunity to grow the Vauxhall brand, building on their existing strengths and commitments."

The politician's take: "There must be doubts"

Former business secretary Sir Vince Cable though, says "a serious question mark" remains about jobs in the UK plants.

"When it comes to thinking about new models, particularly under the new owners, there's one big doubt which is the future of the customs union and Single Market arrangements," he said on BBC Radio 4 Today's programme.

"Car components have to go backwards and forwards across frontiers and they will require tariffs and checks, and Vauxhall particularly is exposed to this; about 80 per cent of its exports are to the EU, and most of its components are, and if you're a hard headed car executive looking at the competitiveness of Britain versus German plants, Britain I'm afraid is going to slip down the rankings in the future."

The analysts' take: Job cuts "unlikely to happen" soon

Analysts at Evercore said last month PSA could shut three production plants. The Astra is made at Ellesmere Port in the UK, and Evercore thinks that could be closed to shift manufacturing to a cheaper overseas site without the need for additional capacity.

Today though, Arndt Ellinghorst, head of global automotive research at Evercore, said any job cuts look "unlikely to happen during the next three to four years". He said: "Tavares was clear that major product decision will be taken once Opel platforms are running out," which is mostly beyond 2020.

The business professor's take: "It is a question of politics and power"

Professor Peter Wells of Cardiff Business School also thinks the Ellesmere plant "has three or four years yet" with the current generation Astra: "However, what happens thereafter is far less certain."

"Ultimately, it is not just a question of economics, of productivity, or even of trade," Wells said. "It is a question of politics and power, and in this regard the Vauxhall operations are certainly more vulnerable with the UK out of the EU and not 'home' to the major investments held by PSA and GM Opel, i.e. France and Germany."

Read more: PSA will honour commitments to Vauxhall plants says business secretary

The industry's take: "Encouraged by the active role the government has played"

Mike Hawes, chief executive of the Society of Motor Manufacturers (SMMT) said: "We are hopeful that this deal will provide a positive future for the plants at Luton and Ellesmere Port and the wider supply chain given their inherent advantages. We have been encouraged by the active role government has played reassuring investors of its determination to safeguard our competitiveness despite the uncertainty of Brexit."

The union's take: "Uncertainty caused by Brexit is harming the UK auto sector"

Unite's general secretary Len McCluskey said it has been "a very difficult time" for the workforce, and the union's focus is now on "working with the new owners to persuade them of the evident merits of our plants and this excellent, loyal workforce".

"But there is also a role for the government to play. The uncertainty caused by Brexit is harming the UK auto sector," McCluskey added. "We need every assistance from the government to give this sector a fighting chance. That absolutely includes committing now to securing access to the Single Market and customs union. This is the signal that the car industry needs in order to know that the UK government values this sector."

The pensions question mark

While the historic liabilities of the Vauxhall scheme will stay with GM, the pensions arrangements for current workers isn't so clear.

"Once pensions are properly taken into account it is costing GM at least €4bn to get rid of its European operations," said John Ralfe, independent pension consultant. "Although GM is receiving €2.2bn from PSA, it is also paying them €3bn to take on some of the pension liabilities, so a net cost of €0.8bn. But GM also retains the bulk of the UK and German pensions. We don't know the precise value, but it will be a liability of over €3bn."

While Vauxhall workers are currently in a generous defined benefit pension, based on their salary and years service, PSA has not said what sort of pension they will get under their ownership. "It is likely to be a defined contribution, with no guaranteed pension," Ralfe said. "This change will be a fall in overall pay and perks of 10 to 15 per cent."

Related articles