Vauxhall future uncertain after GM-PSA deal and Brexit vote

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Thread: Vauxhall future uncertain after GM-PSA deal and Brexit vote

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    Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Vauxhall future uncertain after GM-PSA deal and Brexit vote
    February 17, 2017
    Benjamin D Katz, John Ainger, and Christopher Jasper
    Bloomberg via AutoNews.com

    In March last year, UK Prime Minister David Cameron stood on the assembly line at the Vauxhall car plant in Ellesmere Port near Liverpool and warned that the factory was exactly the kind of success story that could be killed off by a vote to leave the European Union.

    Less than 12 months on, Cameron is out of a job, his successor Theresa May is preparing a complete split from the EU and Vauxhall's future is uncertain as owner General Motors mulls the sale of its unprofitable European arm to France's PSA Group -- a move that may have been triggered by the Brexit vote.

    With German politicians already lobbying to protect jobs at Vauxhall's sister brand Opel and PSA, part-owned by the French state, unlikely to favor cuts at its plants, a post-sale savings push would inevitably put the UK business under pressure even without the EU schism. The consequences of a so-called "hard Brexit" may leave it even more vulnerable.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    "Opel has a huge problem with its plants not being fully utilized," said Thomas Goettle, head of automotive at PA Consulting in Frankfurt. "They are probably hammering out a deal that's in favor of Germany and France, so I don't see the brightest future for the UK." Either Ellesmere Port or Vauxhall's second plant at Luton, north of London, could close, he said.
    Sad business if the brand (and the plants) are doomed. That said, there could be some significant opportunity if someone else wants to take over those assets. I've read about any number of Chinese automakers who would pay quite handsomely for a Western brand --- even one with as limited a market-presence as Vauxhall. We've seen SAIC take over MG and have limited production in Longbridge (the former MG Rover assembly plant). If PSA kills Vauxhall and starts importing Opels into the UK, then it's entirely possible (though incredibly difficult) that those assets might find a new owner.

    For the sake of Vauxhall's employees, let's hope that any deal struck won't outright favor the Germans and the French over the Brits.
    Last edited by nadepalma; 02-17-2017 at 08:57 AM.
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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Has the deal actually happened?

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    No.

    If you read the article and look at the labor costs it's obvious which sites should be shut down. Those in Germany, their labor cost is more than twice that of the UK plants.
    From the office of the Burnout Czar.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by nadepalma View Post
    ...
    For the sake of Vauxhall's employees, let's hope that any deal struck won't outright favor the Germans and the French over the Brits.
    Since yesterday the French and German governments are in talk about the deal. Don't know if the British government is involved or even interested in it. Maybe Rupert can tell us more about it.
    Last edited by Toto; 02-17-2017 at 09:36 AM.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Burnout Czar View Post
    No.

    If you read the article and look at the labor costs it's obvious which sites should be shut down. Those in Germany, their labor cost is more than twice that of the UK plants.
    "Brexit"

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Toto View Post
    Since yesterday the French and German governments are in talk about the deal. Don't know if the British government is involved or even interested in it. Maybe Rupert can tell us more about it.
    Dan Ammann, GM CEO, flew into London and was in talks with the UK Prime Minister before flying on to Germany.

    Vauxhall doesn't have many cards to play - Brexit is causing uncertainty - the two assembly factories are just that, assembly - the Astra estate for both Vauxhall and Opel at Ellesmere Port and the Renault Trafic, Opel/Vauxhall Vivaro, Fiat Talento and Nissan NV300 at Luton (all rebadges of the Renault panel van). Ellesmere Port has long had lower labour costs and better efficiency than the German plants but the entwinement of German unions with the German government means that Ellesmere Port is always first in line for closure.

    But equally, Peugeot isn't respected in the UK following it's closure of the Rootes/Chrysler plants in the UK, the final one about 10 years ago.

    I'm resigned to losing both Vauxhall as a brand and as a manufacturer - however the timing might be just right for JLR to buy Ellesmere port, flatten it to the ground and build a new factory for the Rover cars they hope to introduce - I don't know how close to market that project is because they're juggling so many development balls at one time - the UK's building development approval system makes it much easier to aquire land used for the same purpose, ie building cars, than authorise a major change of use.

    I get the impression that Opel/Vauxhall were in the dark about most of this and that both GM and PSA both wanted to keep it secret until it was a done deal.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Ruperts Trooper View Post
    Ellesmere Port has long had lower labour costs and better efficiency than the German plants but the entwinement of German unions with the German government means that Ellesmere Port is always first in line for closure.
    And that's the crux of it right there.

    It has to be 10x harder to close a plant in Germany than it does in the UK. While everyone loves the "kumbaya" kind of feeling in having labor and business in bed with each other, such arrangements often lead to unintended consequences --- such as when it's time to take appropriate action to close a plant, reduce labor expenses, make proper product planning decisions, etc. I respect the Germans a great deal. But at the end of the day, if the decision goes through as it's foreshadowing, they're making a "political" calculation; not a rational business decision.

    Sad, really.

    Quote Originally Posted by Ruperts Trooper View Post
    - however the timing might be just right for JLR to buy Ellesmere port, flatten it to the ground and build a new factory for the Rover cars they hope to introduce - I don't know how close to market that project is because they're juggling so many development balls at one time
    Wait --- WHAT?! Is this true? How did I miss this? Are there really plans in place?

    I've been saying they should do this forever!!! Reviving Rover would spread out costs and create a "bridge" in sharing technology between the lower-end Tata brand and the higher end JLR brands (share transmissions, electronics, possibly engines and other components with JLR; but share FWD-based platforms and related resources with Tata). Plus, any revival would be a boon to any long-term viability to JLR's business; enabling them to create enough scale to comply with global emission regulations schemes (like CAFE) and hopefully make JLR products more profitable (by increasing volume of costly components that can't be shared with Tata-branded products).

    If there's any info on this, I'd love to read it.

    And if it's true, I think you're right and that JLR could be a natural beneficiary to any such plant closure (though I would rather see them re-take over Longbridge for historical reasons, but that' another story).

    Quote Originally Posted by Ruperts Trooper View Post
    - the UK's building development approval system makes it much easier to aquire land used for the same purpose, ie building cars, than authorise a major change of use.
    Same in the US. It's called "brown field redevelopment" vs. "green field development".
    Last edited by nadepalma; 02-17-2017 at 10:36 AM.
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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by mbukukanyau View Post
    Has the deal actually happened?
    Technically, no. But most companies do not comment publicly about potential deals and ongoing discussions. The fact that there are public statements from both companies about this suggests it's almost a done deal.
    "The irony of the Information Age is that it has given new respectability to uninformed opinion" -- John Lawton

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by nadepalma View Post
    Wait --- WHAT?! Is this true? How did I miss this? Are there really plans in place?

    I've been saying they should do this forever!!! Reviving Rover would spread out costs and create a "bridge" in sharing technology between the lower-end Tata brand and the higher end JLR brands (share transmissions, electronics, possibly engines and other components with JLR; but share FWD-based platforms and related resources with Tata). Plus, any revival would be a boon to any long-term viability to JLR's business; enabling them to create enough scale to comply with global emission regulations schemes (like CAFE) and hopefully make JLR products more profitable (by increasing volume of costly components that can't be shared with Tata-branded products).

    If there's any info on this, I'd love to read it.

    And if it's true, I think you're right and that JLR could be a natural beneficiary to any such plant closure (though I would rather see them re-take over Longbridge for historical reasons, but that' another story).


    Same in the US. It's called "brown field redevelopment" vs. "green field development".
    JLR need a new platform for Discovery Sport and Evoke - the existing one is a multi-evolution from the Ford EUCD platform - a new platform needs to scale downwards to allow compact (and maybe sub-compact) CUV/SUVs within the Land Rover and Range Rover sub-brands - they also need cars to sit below Jaguar in the way that Rover did until the 1970s.

    They've already identified the need for a 3-cylinder version of the Ingenium engine which would also get economy of scale if used in Rover Cars as well as compact LR and RR models.

    My main contact from the JLR Gaydon test facility has now retired so I no longer get the snippets I used to - or maybe they've just tightened up on security.

    Not Longbridge, please - that has too much unpleasant history - and it represents the devaluing of the Rover brand when they slapped the badge on poorly-built Austins.
    Last edited by Ruperts Trooper; 02-17-2017 at 10:56 AM.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    I mentioned to my buddy that if the Vauxhall plants get closed it could be a perfect opportunity for JLR to at least take over Ellesmere Port. As Ruperts Trooper mentioned, if JLR want to expand beyond Jaguar and LR/RR products they could build a new line of Rovers at Ellesmere port. I will say though that if PSA decide to close these UK plants due to BREXIT, and because it's easier, in favor of the German or mainland European factories and think the UK buyer will blithely buy a rebadged imported OPEL (or even just an Opel) then IMO UK sales will crater.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by SKH View Post
    I will say though that if PSA decide to close these UK plants due to BREXIT, and because it's easier, in favor of the German or mainland European factories and think the UK buyer will blithely buy a rebadged imported OPEL (or even just an Opel) then IMO UK sales will crater.
    Most Vauxhalls sold in the UK are imported anyway so no real change there - I think the saga will just accelerate the UK market switch from mainstream to German premium brands.

    My son has Vauxhall Astra and Skoda Octavia on his shortlist to replace his Vectra-C - I can see that being resolved in Skoda's favour.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Ruperts Trooper View Post
    Dan Ammann, GM CEO, flew into London and was in talks with the UK Prime Minister before flying on to Germany.

    Vauxhall doesn't have many cards to play - Brexit is causing uncertainty - the two assembly factories are just that, assembly - the Astra estate for both Vauxhall and Opel at Ellesmere Port and the Renault Trafic, Opel/Vauxhall Vivaro, Fiat Talento and Nissan NV300 at Luton (all rebadges of the Renault panel van). Ellesmere Port has long had lower labour costs and better efficiency than the German plants but the entwinement of German unions with the German government means that Ellesmere Port is always first in line for closure.

    But equally, Peugeot isn't respected in the UK following it's closure of the Rootes/Chrysler plants in the UK, the final one about 10 years ago.

    I'm resigned to losing both Vauxhall as a brand and as a manufacturer - however the timing might be just right for JLR to buy Ellesmere port, flatten it to the ground and build a new factory for the Rover cars they hope to introduce - I don't know how close to market that project is because they're juggling so many development balls at one time - the UK's building development approval system makes it much easier to aquire land used for the same purpose, ie building cars, than authorise a major change of use.

    I get the impression that Opel/Vauxhall were in the dark about most of this and that both GM and PSA both wanted to keep it secret until it was a done deal.
    Off-topic: Powerful German unions are so pre 1990's. Don't get me wrong, I don't blame you personally, but that's a cliche often used by english-speaking media. Within 20 years after the reunion, Germany changed from 'the sick man of Europe', as the Anglo-Saxon media labeled us, to the 'China of Europe' with the biggest low wage sector in the EU. The car sector is different though, but you must consider that 4 of 5 German car manufacturer are premium brands.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Toto View Post
    Off-topic: Powerful German unions are so pre 1990's. Don't get me wrong, I don't blame you personally, but that's a cliche often used by english-speaking media. Within 20 years after the reunion, Germany changed from 'the sick man of Europe', as the Anglo-Saxon media labeled us, to the 'China of Europe' with the biggest low wage sector in the EU. The car sector is different though, but you must consider that 4 of 5 German car manufacturer are premium brands.
    I quite understand that car workers at premium brands get premium pay rates - but Opel/Vauxhall isn't - I don't know the figures but I don't expect Vauxhall workers to be getting the same as Range Rover.

    Taking into account whole life pay there does seem to be a pension issue within Opel/Vauxhall if reports are correct that the pension deficit is bigger than the value of Opel/Vauxhall.

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    Re: Vauxhall future uncertain after GM-PSA deal and Brexit vote

    Quote Originally Posted by Ruperts Trooper View Post
    Dan Ammann, GM CEO, flew into London and was in talks with the UK Prime Minister before flying on to Germany.

    Vauxhall doesn't have many cards to play - Brexit is causing uncertainty - the two assembly factories are just that, assembly - the Astra estate for both Vauxhall and Opel at Ellesmere Port and the Renault Trafic, Opel/Vauxhall Vivaro, Fiat Talento and Nissan NV300 at Luton (all rebadges of the Renault panel van). Ellesmere Port has long had lower labour costs and better efficiency than the German plants but the entwinement of German unions with the German government means that Ellesmere Port is always first in line for closure.

    But equally, Peugeot isn't respected in the UK following it's closure of the Rootes/Chrysler plants in the UK, the final one about 10 years ago.

    I'm resigned to losing both Vauxhall as a brand and as a manufacturer - however the timing might be just right for JLR to buy Ellesmere port, flatten it to the ground and build a new factory for the Rover cars they hope to introduce - I don't know how close to market that project is because they're juggling so many development balls at one time - the UK's building development approval system makes it much easier to aquire land used for the same purpose, ie building cars, than authorise a major change of use.

    I get the impression that Opel/Vauxhall were in the dark about most of this and that both GM and PSA both wanted to keep it secret until it was a done deal.
    That's a naive view of 21st Century economics. Labor and raw materials are important costs, but they are not nearly as important as they once were. Economies of scale and time to market are extremely important today. Cars built in the UK give you advantage to reaching customers in the UK, but nowhere else. Building on the Continent gives you land access to the entirety of Europe.

    If Vauxhall were viable as a standalone brand even under offshore corporate ownership, then it would not be little more than a purveyor of RHD Opels that it is today. Will this arrangement continue under PSA ownership? There are circumstances under which I can see it continuing. However, there are too many scenarios to count under which Vauxhall disappears.

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