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Vauxhall/Opel bought by French motor manufacturer PSA in £1.9bn deal

Vauxhall/Opel bought by French motor manufacturer PSA in £1.9bn deal

PSA Group, which owns Citroen, Peugeot and DS, is to buy General Motors’ lossmaking Opel division, which includes Vauxhall, in a €2.2 billion (£1.9 billion) deal.

The acquisition, expected to be finalised before the end of 2017, was announced on the eve of this year’s Geneva Motor Show and will make PSA the second-largest carmaker in Europe after Volkswagen with a 17% market share.  

The deal sees General Motors finally cut ties with Europe after a decade of losses in the region. Vauxhall built its first car in 1903 and the company was acquired by General Motors in 1925.  

PSA, which only three years ago was on the brink of collapse, is hoping that the acquisition will help it build on its recovery, adding much needed scale to its operations.  

Since 2012, General Motors and PSA Group have been implementing an alliance covering, to date, three projects in Europe and generating substantial synergies for the two groups.  

In a joint statement, PSA said it hoped that the deal would provide the stringboard for “profitable growth worldwide”.  

However, there were immediate concerns for the long-term future of Vauxhall plants in Ellesmere Port and Luton. The Vauxhall Astra is manufactured in Ellesmere Port in a contract that expires in 2021. The Vauxhall Vivaro van and engines are produced in Luton where the current contract runs until 2024.  

Jointly the plants employ around 4.500 people with thousands more people employed in Vauxhall’s franchise dealer network and in the supply chain.  

What happens to the future of those two plants after current contracts expire remains to be seen. 

The government was involved in discussions with both PSA and General Motors prior to the deal being agreed. Following the announcement, Business Secretary Greg Clark, said he was “cautiously optimistic” about the future of Vauxhall.  

He told the BBC: “The conversations that I and the Prime Minister have had, both with General Motors and PSA, tell me [PSA] intend to safeguard the plants, honour their commitments and look to increase the performance and the sales of cars. We want to hold them to those commitments, but the messages we’ve had lead me to be cautiously optimistic.”  

The UK’s biggest union, Unite has said that the fight begins now to secure a future for the plants.  

Unite general secretary Len McCluskey said the UK plants were the most productive in the General Motors’ stable, earning them the right to a future under the new owners.  

He said: “Now that General Motors has disposed of its UK sites, our focus switches to working with the new owners to persuade them of the evident merits of our plants and this excellent, loyal workforce.  

“I am determined that we can convince the new boss, Carlos Tavares, that it makes sense for him to continue to build in Britain. Our plants are the most productive in the European operation, the brand is strong here, the market for the products is here, so the cars must be made here.”  

The manufacturers’ joint statement highlighted that the acquisition would “allow substantial economies of scale and synergies in purchasing, manufacturing and research and development”.  

That immediately sent alarm bells ringing among trade unions with PSA suggesting that there would be annual synergies of €1.7 billion by 2026 - of which a significant part is expected to be delivered by 2020, accelerating Opel/Vauxhall’s turnaround.  

PSA said it expected Opel/Vauxhall to reach a recurring operating margin of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow by 2020.  

The deal also includes General Motors Financial’s European operations via a newly formed 50%/50% joint venture with BNP Paribas that will retain General Motors Financial’s current European platform and team.  

Carlos Tavares, chairman of the managing board of PSA, said: “We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround.  

“We respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalising on their respective brand identities. Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.  

“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by General Motors to the Opel/Vauxhall employees.”  

Mary T. Barra, General Motors’ chairman and chief executive officer, said: “We are very pleased that together, General Motors, our valued colleagues at Opel/Vauxhall and PSA have created a new opportunity to enhance the long-term performance of our respective companies by building on the success of our prior alliance.”  

The sale of General Motors’ European operation to PSA allows the Detroit-headquartered company to focus on growth in its domestic market and emerging markers, which include China.  

Ms Barra said: “For General Motors, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility.  

“We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects.”