Peugeot-owner PSA is making nice as it takes control of Vauxhall but tough decisions lie ahead

Brexit hangs over everything and the downside of Britain’s flexible economy is that it’s cheap to fire people 

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PSA Group boss Carlos Tavares was saying all the right things as his company’s acquisition of General Motors’ European arm, including Vauxhall, was confirmed. 

“I trust my Vauxhall employees in the UK,” he said. “I know that they are skilled. I know that they are dedicated. I know that they are committed. As long as we improve their performance and we become the best, there is no risk they should fear”. 

British ministers take note. There’s a lot you could learn from this man as regards diplomacy. 

However, away from the honeyed words, hard negotiations lie ahead and while the company’s factories at Luton and Ellesmere Port are safe for now, their long-term futures remain in doubt. 

Unite leader Len McCluskey said the union has been working “day and night to fight for members’ interests” and pledged to continue to do so. He’ll need to be at the top of his game. General Motors Europe lost its previous owner billions. Mr Tavares cannot allow it to continue haemorrhaging cash, not if he wants to keep his job. 

There will inevitably be some short-term pain involved in getting the plants to where he wants them to be. That was what his comment about improving performance was all about.

Of more concern, however, to both Mr McCluskey and the Brexit Government is what happens two to three years out. 

Vauxhall employs 4,500 people directly at its plants in Luton and Ellesmere Port, plus a further 18,000 indirectly in the supply chain. If those jobs are lost, it’s unlikely that there will be anything like them along to plug the gap. 

The location of the new Vauxhall Astra’s construction is an open question. Given the uncertainty created by Brexit, what would you do in Mr Tavares’s position? (Consider the possible imposition of tariffs and the near certainty of extra bureaucracy when exporting cars from a Britain outside of the EU, thanks to the May government insisting on a “hard” Brexit.)

You might very well be tempted by put your shiny new model somewhere that limits its impact. Go with Britain and the tariffs and bureaucracy will affect exports to the enormous European single market. Opt for somewhere in Europe and they will only effect exports to the much smaller British market. QED. 

In point of fact, it’s not just PSA that is or will be considering its position against that backdrop. The same is true for almost every carmaker operating within these shores. Keeping them could get expensive in terms of the concessions and sweeteners they may demand to compensate them for what they’re going to have to put up with in future. 

As for the more immediate need to make cuts so GM Europe makes money, well, right-wingers often hail Britain’s “flexible” labour market. Trouble is that flexibility makes it very much easier to fire British workers than it does their German or French colleagues. 

Again, what would you do when deciding where to swing the axe?

It is true that the UK remains an important market for PSA, and Mr Tavares will have noted the more assertive, interventionist line taken by the British Government towards the economy and business of late. He’ll probably be open to a deal to keep things sweet. 

As I said, keeping carmakers around in Britain could soon start to get very expensive. 

 

 

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