Peugeot owner PSA close to deal to buy Vauxhall and Opel

Vauxhall employs 4,500 workers across its UK production sites – at Ellesmere Port in Cheshire and Luton – and has a pension deficit of as much as £1bn.

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This article titled “Peugeot owner PSA close to deal to buy Vauxhall and Opel” was written by Graham Ruddick, for theguardian.com on Saturday 4th March 2017 07.26 UTC

The owner of Peugeot and Citroën is close to completing a deal with General Motors to buy its European car brands Vauxhall and Opel.

Groupe PSA and GM could announce a deal as early as Monday morning after successful talks between the carmakers.

Negotiations about a potential acquisition were revealed last month and the board of PSA is now understood to have approved the deal.

The announcement of a deal will kickstart an brutal political battle between the governments of France, the home of PSA, Germany, the home of Opel, and Britain, the home of Vauxhall, to protect jobs and plants in their countries.

Carlos Tavares, the boss of PSA, has said the acquisition offered an “opportunity to create a European car champion”. The enlarged company could sell more than 5m vehicles a year but PSA is understood to be aiming to cut as much as €2bn (£1.7bn) in annual costs by combining Peugeot and Citroën with Opel and Vauxhall.

The deal between PSA and GM is likely to include a plan for Vauxhall and Opel’s growing pension deficit.

Vauxhall employs 4,500 workers across its UK production sites – at Ellesmere Port in Cheshire and Luton – and has a pension deficit of as much as £1bn. The scheme had a deficit of £840m at the end of 2014, according to regulatory filings, but analysts estimate that it could now be more than £1bn. John Ralfe, a pensions expert, said PSA would be “rip-roaring bonkers” to take on the pension scheme.

Tavares has already held talks with Theresa May, the prime minister, Greg Clark, the business secretary, and Unite’s general secretary, Len McCluskey, about the deal. The PSA boss offered assurances about existing production commitments being met – meaning the UK plants would stay open until at least 2021 – and pointed out the company did not have a track record for shutting plants.

However, Sir Vince Cable, the business secretary between 2010 and 2015, warned that Britain’s exit from the European Union could lead to cuts at Vauxhall.

Cable said the German government was likely to be lobbying heavily to protect the Opel workforce and plants in the country. Roughly half of Opel’s 35,000 workers are in Germany.

Cable said: “I imagine there will be some ferocious German canvassing and it’s difficult to see what Britain can offer other than years of uncertainty.”

Nonetheless, the current business secretary has promised the government’s “unbounded commitment” to protecting jobs at Vauxhall. Clark told MPs in the House of Commons last month the government would “do everything we can” to protect Vauxhall.

Clark’s comments raised the prospect of the government offering sweeteners to PSA in an attempt to secure the future of the Ellesmere Port and Luton plants, similar to how Nissan was offered reassurances before pumping new investment into its Sunderland plant.

“My personal commitment and the commitment of this government will be unbounded to make sure the future of the workforce will be maintained,” Clark said.

“I will of course work with all the groups, including the trade unions, including the workforce, to make that case, if new owners there are to be, to those new owners.”

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