The PSA Group will continue to produce the Vivaro van - and likely other Peugeot and Citroen vans - at Vauxhall's Luton plant
A Vauxhall Vivaro on the line at the Luton plant
The Vauxhall Vivaro is a sales success
The next generation of Vauxhall Vivaro as well as existing Citroen Dispatch and Peugeot Expert vans will be built at the car maker's Luton plant from 2019 onwards, essentially confirming the future of the factory for a decade.
Since the PSA Group, which also owns Citroen, DS and Peugeot, bought Vauxhall and Opel from General Motors last year, there has been a huge question mark over the future of Vauxhall’s Luton and Ellesmere Port plants in the UK, which build the Vivaro and Astra respectively. The decision safeguards the future of the Luton plant, and PSA bosses have said a decision over Ellesmere Port will be made in 2020.
PSA chairman Carlos Tavares says the firm has now reached a deal with the UK Government, the Unite trade union and Luton Borough Council over the future of the plant. The deal includes an investment of £9 million from the UK Government, and will result in PSA investing in the site to increase production capacity to around 100,000 vehicles per year. The plant produced 60,000 Vauxhall/Opel Vivaro vans in 2017. The PSA release noted the deal had been reached "despite Brexit uncertainties".
"Performance is the trigger for sustainability and I would like to thank all stakeholders involved and underline the open mindset of our union partners, as well as that of the UK Government," said Tavares. "This is a major milestone for the future of the Luton plant and a key enabler to serve our ambitions in the commercial vehicle market, guaranteeing customers the best offering in the segment."
With the lifecycle of a commercial van around 10 years, the decision likely safeguards the future of the Luton plant until 2029. Unite Union general secretary Len McClusky said the deal would lead to the creation of around 350 new jobs at the site.
Tavares: we took a 'risk' on Luton
Speaking at the announcement in Luton, Tavares added that progress still needed to be made at the site. "Luton has decreased manufacturing costs by 17% in 2017 compared with 2016," he said. "It still needs to decrease by another 20% to be in line with continental plants.
"This plant is solid. We've been reviewing it this morning and this is a serious plant. PSA is a strong number one in Europe for light commercial vehicles, and we have plans to increase our worldwide presence."
Tavares added that the group will increase production at Luton instead of doing so at its French facility. "We are taking the risk to decide it now, and we will be working together in a more intense and efficient way to be the winners in this period of uncertainty. There was a choice to increase production capacity in our French LCV plant, but we want to use the full capacity of our manufacturing system in Europe, including the UK. We are working to give each of our plants the chance to be in control of their destiny."
The Vivaro has been built in Luton since 2001. It has been a sales success for Vauxhall and Opel, with a record 15,587 sold in Europe last year - up from 12,376 in 2016. The Vivaro shares a platform with the Renault Trafic as part of a joint venture. Today’s announcement ends that deal, with Tavares understood to be keen to cut ties with its rival French car maker.
Instead, the new Vivaro, to be built at the plant from 2019, will use the same EMP2 PSA Group platform which is used on rival vans, the Citroen Dispatch and Peugeot Expert. PSA sold 476,500 light commercial vehicles in 2017, a figure that rises to 658,000 when passenger car derivatives (such as the Peugeot Traveller) are included.
The PSA announcement states that EMP2 production will be localised by mid-2019, using both the Luton site and the PSA facility at Hordain in France. Tavares confirmed to Autocar that the Citroen Dispatch and Peugeot Expert will be built in Luton alongside the Vivaro, starting in 2019.
In a statement, Renault said it had reached "mutual agreement" with PSA to end the Vivaro/Trafic joint venture. It added: "The impact on Groupe Renault manufacturing plants is very limited. These plants will still be running at a high level of activity to support Groupe Renault's sustainable growth as outlined in the 'Drive the Future' mid-term business plan."
Renault also confirmed its deal to produce the Vauxhall/Opel Movano - based on the Renault Master - at its Batilly plant in France remains in place.
Government: Luton decision a 'vote of confidence'
Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy, also attended the announcement, in which it was revealed that the Government was contributing financially to the plant’s growth. It is an important investment for the Government demonstrating its commitment to UK manufacturing in the wake of Brexit.
Clark said: "Today's decision is a vote of confidence in Vauxhall's high-skilled workforce and the UK's world-leading automotive sector. This investment in upgrading the production platform will safeguard and grow jobs, ensuring the future of the Luton plant well into the next decade and help ensure the plant is well positioned for future Vauxhall models to be made in the UK."
The confirmation of the new model will also be a boon for the Government amid concerns that car makers may cut jobs and move production away from the UK as it leaves the EU.
Around 75% of the vans produced at Luton are currently exported. Clark added: "We are absolutely clear of the central requirements to maintain access to markets that have been very successful for exporting. That means trade that is tariff free and without friction."
However, Tavares did raise Brexit during his speech. He said: "Brexit remains a concern for our business. The recent clarity helped us move towards transition a bit more confidently, but there is still more to be done to ensure frictionless trade."
Ellesmere Port decision due by 2020
Today’s news ends concerns about its Luton plant, but the efficiency of Ellesmere Port remains in doubt, with Tavares saying a decision needs to be made on its future within the next three years. While Luton has proved itself to be efficient enough for PSA’s factory empire, Ellesmere Port is understood to be trying to reduce its manufacturing costs for the Astra so it can prove its case when the next generation of the compact model is due early next decade.
Last month, PSA boss Carlos Tavares said Ellesmore Port must close the cost and quality gap between it and its European equivalents to survive. Speaking today, he said: "The current Astra launches in 2016, and the lifecycle is seven years, so ends in 2023. The decision [on Ellesmere Port] needs to be made three years ahead, which is 2020 - so let's meet in 2020.
"We are lucky because we need to catch up all the productivity that was not done during the past 20 years. While everybody is waiting for Brexit we are trying to rebuild productivity of the plant by 2020. At that time we'll have the answer - and it will be the perfect time, because we will know the outcome of Brexit."
PSA's £1.9bn buyout of General Motor’s Opel/Vauxhall subsidiary and GM Financial’s European operation, valued at £1.2bn and £800m respectively, was completed last summer. The move made PSA the second biggest-selling car group in Europe after Volkswagen. Enlarged PSA now has a 17% share of the European market.
Vauxhall was founded in the London borough it took its name from in 1857, and built its first car in 1903. Production moved to Luton in 1905, and the company has had a production facility at the site ever since. Car production ceased at the site in 2002.
UK car industry welcomes deal
The deal has been welcomed by Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders.
“This announcement is great news for the UK automotive sector and, especially, the Luton plant," said Hawes. "The UK continues to be a centre of excellence for vehicle production thanks to our engineering expertise, high levels of productivity and a collaborative relationship with government which has enabled us to build a robust industrial strategy and a sector deal."