Opel-Vauxhall: Sale to PSA Group

Lord Mendelsohn Excerpts

Monday 6th March 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, I beg leave to repeat as a Statement an Answer to an Urgent Question given by my right honourable friend in another place:

“This morning the boards of General Motors and PSA Group announced plans for PSA to acquire GM’s Vauxhall-Opel operations. The proposed deal is expected to be completed by the end of this year.

The Prime Minister and I have been engaged in discussions with both GM and PSA, and with the French and German Governments, to ensure that the terms of the agreement can give confidence to Vauxhall’s UK workforce now and for the future. Vauxhall is an iconic, important and successful British car manufacturer. Vauxhall cars have been made in Britain for 113 years, and we are determined that that should continue to be the case for many years to come.

The car plants at Ellesmere Port and Luton have a proud record of being among the most efficient in Europe, with workforces that are skilled, committed and flexible. Both PSA and GM have confirmed to the Prime Minister and me a number of important commitments, including that the company will honour its agreements with the Vauxhall workforce; that Vauxhall pensioners will be in at least as good a position as they are today; that the treatment of the UK division will be equal to that of other countries in the Vauxhall-Opel group; that the identity of Vauxhall will continue to be distinct and prominent; that the strategy of the new company will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales around the world; and that the company will work with me and the rest of the automotive sector to ensure that it can participate in a substantial programme of research and investment for innovation in areas such as electric vehicles and battery technology, which is part of our industrial strategy.

This morning I had a further conversation with my French counterpart, the industry Minister, and the Minister of State spoke again to his German counterpart to agree a consistent approach. I speak frequently with Len McCluskey, the general secretary of the largest trade union in Vauxhall and I have kept, and will keep, colleagues with particular constituency interests up to date at all times.

It is in everyone’s interests that Vauxhall can look forward to a successful future. A generation ago, the car industry was one that epitomised our economic woes. Today that industry is a beacon of success. Companies invest in Britain because our automotive sector has a high-quality workforce and world-class efficiency, and is part of one of the most exciting places for innovation and research in new technology anywhere in the world. The future of the motor industry is bright in Britain, and we will be active at all times in doing everything we can to make it brighter still”.

My Lords, that concludes the Statement.

[Lord Mendelsohn (Lab)]

I am obliged to the Minister for repeating the Statement from the Business Secretary. GM has shown great resilience over the years with the Opel and Vauxhall brands, and reported a loss of $257 million from its European operations in 2016. That is the 16th consecutive loss-making year for GM in Europe, bringing losses on the continent since 2000 to more than $15 billion.

GM chairman and chief executive Mary Barra said that the business would have broken even in 2016 had it not been for the UK’s vote to leave the European Union, which caused a sharp drop in the value of sterling. We should congratulate the excellent workers in the UK who have done a great job to turn around GM’s performance, but unfortunately they will gain little credit for it. The factories at Ellesmere Port and Luton employ about 4,500 people, and a supply chain of at least another 7,000. We hope that this transaction provides them with a secure future, restores growth to these brands and creates a long-term and growing future for Ellesmere Port and Luton.

I would be grateful if the Minister told us a little more about the nature of the assurances the Government received from the PSA group during their discussions. What specifically have they learned about safeguarding the plants? What have they learned about the PSA group’s plans to invest to upgrade capability to meet the specifications and scale of the facilities they have been committed to over recent times? What assurances have they received about the development of the Vauxhall brand and its sales in overseas markets beyond the EU? What assurances have they received about investment to retool the plants in the UK to develop other brands? Does the PSA group remain committed to the current Astra model in Ellesmere Port up to 2020-21 and the production of a new model there, and will Luton be able to fulfil its plans deep into the 2020s?

Secondly, I would be grateful if the Minister addressed the problem of the scale of the UK supply chain. Speaking after the announcement, the chairman of the PSA’s management board, Carlos Tavares said that tough terms for leaving the EU could be an opportunity for Vauxhall and PSA to develop a supplier base in the UK to give the whole operation a “pound cost structure”. Not only do they harbour concerns about the general state of the UK parts ecosystem; it is clear—and Vauxhall sales are 80% EU—that their consideration of how we handle not just the negotiation of withdrawal, the single market and the customs union but the industrial strategy will play a very important part.

This is a wider concern. In evidence to a Select Committee in the other place, Colin Lawther, Nissan’s senior vice-president of manufacturing supply chain, denied that the Government had agreed to any deal or received any particular assurances. He said that Nissan and the automotive industry had made a “strong request” for government support for £100 million to £140 million of investment for a supply development fund to “repower the supply base” and build an indigenous, high-tech car components sector in the UK. Nissan, too, is looking to increase content from British suppliers and says that this opportunity alone is worth £2 billion.

The future of PSA’s investment in Vauxhall and other parts of the car industry is about the importance of developing the supply chain, in addition to the measures the Government are already implementing. It is clear that the Government’s current approach is inadequate, so I would be grateful if the Minister assured us that a meaningful new strategy to develop the UK supply chain is under way.

[Lord Prior of Brampton]

I thank the noble Lord for those questions. To pick them up in turn, Carlos Tavares, the chief executive of PSA, has given assurances that he is keen to see this business develop and grow. He made the point that since becoming chief executive of PSA, he has not closed a single plant.

Regarding future models, post the Astra at Ellesmere Port, clearly, we will have to compete with other factories within the PSA group, as would have been the case had it remained part of General Motors. We are all very confident that we have the competitiveness and effective abilities, and the quality and brand at Ellesmere Port and Luton, to compete on a fair basis with any plant in Europe. PSA is absolutely committed to the Astra brand. There will be no need for a new model post 2020-21 for Ellesmere Port, and the Navara will continue to be produced at the Luton factory for longer still.

The noble Lord is absolutely right about the supply chain: it was an issue with Nissan as well as PSA. Carlos Tavares made the point that there are opportunities and risks on leaving the European Union. One of the opportunities will be to make the new models in the UK more of a sterling player, as the noble Lord put it. That means having a higher proportion of sterling-sourced components going into the Astra or indeed into any new model. We are committed to working with the automotive sector to try to boost the supply chain in the UK to ensure that more sterling-based components go into these cars.