There is no word on the future of Vauxhall's two UK factories in Luton and Ellesmere Port. A Vauxhall spokesman told Autocar it was "business as usual" at the moment.
PSA Group boss Carlos Tavares said: “We are witnessing the birth of a true European champion today. We will assist Opel and Vauxhall’s return to profitability and aim to set new industry benchmarks together. We will unleash the power of these iconic brands and the huge potential of its existing talents. Opel will remain German, Vauxhall will remain British. They are the perfect fit to our existing portfolio of French brands."
Lohscheller said Opel is "eager to build the [business] plan with PSA’s support", and added that the economies of scale and synergies in purchasing, manufacturing and R&D could help the new group to save an estimated £1.5bn each year.
A much leaner management structure will be implemented, said Lohscheller: "We are reducing complexity and increasing spreed. I am looking forward to shaping the next chapter of Opel/Vauxhall with the new management team and leading our company into a successful future. The owners and the employees will not be the only ones to benefit from ever stronger Opel and Vauxhall brands – our customers will do so too.”
This confirmation follows the announcement last month that the European Union's antitrust authority “unconditionally approved” PSA’s plans to buy Opel and Vauxhall, concluding that “the transaction would raise no competition concerns”.
The PSA Group sold 3.5m cars globally last year and Vauxhall/Opel sold 1m.
PSA has previously said the decision allowed it to support worldwide profitable growth, while General Motors, current owners of the Vauxhall/Opel brands, said it "advances GM’s transformation and unlocks shareholder value through disciplined capital allocation".
In a press release confirming the purchase in March, PSA Group boss Carlos Tavares said PSA would respect existing brand identities and "help accelerate [Opel's] turnaround", referring to its recent struggles; last year, it lost £200m.
"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 capitalizing 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 GM to the Opel/Vauxhall employees,” continued Tavares.
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GM boss Mary Barra said at the time: “For GM, 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.”
Collaboration between the two firms is likely to include use of electrification technologies and existing supply agreements for Holden and certain Buick models. PSA may also source fuel cell systems from the GM/Honda joint venture.
Opel/Vauxhall will also continue to benefit from intellectual property licenses from GM until its vehicles convert to PSA platforms over the coming years. This suggests that as Opel/Vauxhall models come to the end of their current life - for example, the Astra is due to be replaced in 2021 - vehicles will move on to PSA platforms. If this is the case, then current production cycles would be maintained and this would insure both Opel/Vauxhall plants in the UK were safe until at least 2021.
"We believe the only thing that really protects [our employees in each brand] is their ability to be at the right level of performance," added Tavares suggesting UK plants could survive if performance continues to grow.
He added: “We do not need to shut down any plants. If you look at the track record of PSA over the last few years, the numbers being the improvement of efficiency of our plants, it is a fact to say that since I took the helm of PSA we did not close any plants." He added that he would improve efficiency of GM plants, but did not elaborate further.
Meanwhile, Tavares told investors and analysts that a so-called hard Brexit could create an opportunity for PSA if it kept the two UK-based Vauxhall/Opel plants.
"Vauxhall/Opel was prevented until now to sell overseas,' said Tavares. "There is an export potential opportunity for us. There is also the Brexit and the risk and the opportunity to have inside of the UK some manufacturing plants in case we have a hard Brexit. All of this represents opportunities we want to tackle." Car makers fear that leaving the European market will result in applied tariffs for exporting and importing vehicles to Great Britain. If Peugeot were to have a car plant in Britain, it would overcome such tariffs.
Talking on the subject of Brexit, he added: "Nobody knows how it is going to unfold. Either it’s hard or it’s soft. If it is soft, we are all on performance. Maybe an opportunity will be strengthened by the weakness of the pound. If it is a hard Brexit, perhaps it will be an opportunity to source the UK from the UK [keep entire production chain in UK to remove export/import costs] – so that the cost structure will be more in pounds."
Meanwhile, Barra blamed Brexit for Vauxhall/Opel's precarious position: "It’s clear the team [Vauxhall/Opel] would have hit the target to break even in 2016 had it not been for Brexit." Opel has previously said Brexit cost it about £536m last year, taking it into an overall loss.
Commenting about the sale, UK 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 purchase includes all of Opel/Vauxhall’s automotive operations, comprising Opel and Vauxhall brands, six assembly and five component-manufacturing facilities, one engineering centre and approximately 40,000 employees. GM will retain an engineering centre in Torino, Italy which is a diesel powertrain R&D centre and home to the so-called Whisper diesel.
PSA will not take any liability for existing Opel/Vauxhall pensions - which has been a major point of contention given GM's major pension deficit. All of Opel/Vauxhall’s European and U.K. pension plans, with the exception of some minor plans which will be transferred to PSA, will remain with GM. GM will pay PSA £2.7bn to settle the transferred pension obligations for these minor plans.
How the sale could impact on Vauxhall's UK manufacturing plants
Prime Minister Theresa May has previously spoken with Tavares about Vauxhall's UK plants, as well as a shared desire to "protect and promote" the jobs associated with them, according to a government spokesperson.
However, there is still uncertainty over the implications on UK jobs given Tavares' confirmation of a cost-cutting plan to bring economies of scale.
If the current production cycles stay in place, one of Vauxhall's UK plant, Ellesmere Port, is secure for the current generation of Astra production, which will run until 2021. The other, in Luton, which builds the Vivaro van, would be safe until 2024 under these conditions.
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The future of the plant, as well as Vauxhall's other factory in Luton, has been under scrutiny after the news that PSA, the owner of Peugeot, Citroen and DS, was interested in taking a majority stake in Vauxhall and its European equivalent Opel.
With plants across Europe running at 80% capacity and Vauxhall planning to introduce two new SUVs this year, the Crossland X and Grandland X, it would not be feasible to move production of the Astra model to another European factory in the short- to mid-term. However, if the deal goes ahead, future Astra models can be put on the same platform as Peugeot’s 308 hatchback - at which point the car could be built elsewhere. With the current-generation Astra expected to sell for at least four more years, this suggests Ellesmere Port will continue in its current capacity until at least 2021.
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GM's Vauxhall plants in Ellesmere Port and Luton together employ 4500 staff, while thousands more work in Vauxhall's UK showrooms and supply chain.
Similar fears exist in Germany with the Opel brand. However, PSA has previously said Opel will remain a German company if the takeover is completed and reports suggest PSA boss Carlos Tavares could keep the current management structure of Opel in place.
Even prior to the sale to PSA, Opel's European boss Karl-Thomas Neumann is believed to have created a plan to reinvent Opel and Vauxhall as an all-electric car brand by 2030, with models based around the modular electric car platform used for the Chevrolet Bolt.
In a letter to Opel and Vauxhall employees when the news first broke, GM boss Mary Barra asked for understanding and approval of the possible sale of GM Europe's operations, including the Opel and Vauxhall brands.
The sale would "enable PSA Group and Opel/Vauxhall to improve their position in the rapidly changing European market, due to complementary strengths of both companies", said Barra in the letter, adding "we will do everything possible to ensure the interests of all involved are respected".
How the deal unfolded, and the market position of Vauxhall and Opel
The story broke in the last week of February that GM was in high-level negotiations for the sale of its European operations.
PSA confirmed it was in direct dialogue with GM, but refrained from revealing how far the talks would go. It said in a statement: "PSA Group confirms that, together with General Motors, it is exploring numerous strategic initiatives aiming at improving its profitability and operational efficiency, including a potential acquisition of Opel. There can be no assurance that an agreement will be reached."
GM responded with a near-identical comment: "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. Within this framework, General Motors and PSA Group regularly examine additional expansion and cooperation possibilities, as well. PSA Group and General Motors confirm they are exploring numerous strategic initiatives aiming at improving profitability and operational efficiency, including a potential acquisition of Opel Vauxhall by PSA. There can be no assurance that an agreement will be reached."
GM has been particularly active in recent years in seeking a broad-based co-operation with Peugeot in a bid to cut costs and improve profitability at Opel and Vauxhall.
Within the framework of their existing alliance, Opel has developed two new SUV models from existing Peugeot platforms. They are the new Crossland X, which sits on the same structure as the 2008, and the Grandland X, whose underpinnings are shared with the 3008. An even larger SUV model, conceived to replace the Zafira, is also planned, although it is based on the same in-house GMs platform as the new second-generation Insignia.
However, a full-blown merger between the US car making giant and PSA was torpedoed in 2013, when GM suddenly sold a 7% stake in the French government-owned car maker.
The purchase of Opel and Vauxhall makes PSA the second biggest car maker in Europe, with potential annual European sales of more than 2.4 million and a healthy 17% market share. It enables it to overtake Renault and place it behind only the Volkswagen Group in terms of European sales reach.
In 2016, the French car maker's three brands, Peugeot, Citroën and DS booked 1,446,052 sales, and Opel reported sales of 979,427. By comparison, Renault’s 2016 European sales totalled 1,496,394, helped by the continued success of its Dacia brand. The Volkswagen Group, with its Audi, Bentley, Bugatti, Lamborghini, Porsche, Skoda, Seat and VW brands, pulled in 3,498,049 sales.
The Vauxhall brand, purchased by GM in 1925, presently accounts for around one-fifth of Opel sales, with the UK traditionally being the largest market for the Corsa and Insignia. However, its future under the possible control of PSA raises some uncertainties. One scenario already mentioned by GM sources in discussions with Autocar is the possibility of a sweeping consolidation of Vauxhall's operations in the UK, with the brand name consigned to history and replaced by Opel – a move that was seriously considered by GM following the financial crisis of 2009 but ultimately decided against.
Struggling profitability for General Motors in Europe
GM’s European operations have been unprofitable for the past 16 years, with combined losses put at over £6.9bn since 2009. The US car making giant initially expected a return to profitability in 2016. However, a devaluation of the British pound and cooling sales in the UK following the Brexit vote is claimed to have resulted in unexpected currency losses in 2016, leading to an operating loss at Opel of £194m last year.
PSA itself came close to bankruptcy in 2013 following years of mounting losses. In a company-saving measure, the Peugeot family was forced to sell 25.6% of its stake in the French car maker, with 12.8% going to the French government and a further 12.8% to Peugeot’s Chinese joint-venture partner, Dongfeng. Each paid more than £800,000 for their share of the company. Shortly afterwards, PSA sought a strategic alliance with Opel with a view to joint development of a number of key platform architectures – a move that led to the two establishing a close working relationship and the foundation for the buyout negotiations.
Despite PSA's financial rehabilitation through the establishment of key shareholdings by the French government and Dongfeng and sweeping cost-cutting initiatives instigated by its Portugese-born boss Tavares, PSA's grip on the European market has loosened in recent years.
In 2010, the French car maker captured a 13.1% market share in Europe. However, this was reduced to 9.9% in 2015, placing it behind rival Renault. But while Peugeot’s market share has been eroded through increased competition, its share price has more than tripled, placing it on a more solid financial footing that at any time during the past two decades.
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