Sanjoy Sen is a chemical engineer in North Sea oil and contested Aberdeen North at the 2015 general election.
It’s no surprise that Peugeot’s proposed takeover of GM’s European arm should resonate within the wider Brexit debate. How, after all, might the French giant look at German (EU) Opel plants in relation to British (non-EU) Vauxhall plants? But most of the key issues leading up to the present situation pre-date last year’s referendum by some considerable time. And many of the material facts stand irrespective of the result.
Vauxhall-Opel’s parent company General Motors, one of America’s ‘Big Three’ auto-giants (along with Ford and Chrysler), has been in serious difficulties for a while now. Charles Erwin Wilson’s legendary claim “What’s good for General Motors is good for the country” was a mis-quote* from its 1950s world-leading heyday. But much of the sentiment was correct. GM was already too big to fail. (But that wasn’t going to stop it trying.)
Back then, of course, rivals were thinner on the ground, with Germany and Japan re-building and war still raging in Korea. But GM would later struggle to adapt from post-war optimism to oil-crisis reality, during which economy and reliability suddenly counted for more than high performance and tailfin dimensions. And the mis-handling of Ralf Nader and his safety campaign was a pivotal moment in the public’s perception of big business.
Since its 2008 bail-out (prompting the ‘Government Motors’ jibe), GM is fast consolidating. Once-cherished domestic brands have been culled (Pontiac, Oldsmobile) and the international retreat is underway: Australia’s Holden will cease production later this year. Letting go of its large, long-established European operations is a step-change but, again, the fundamental reasons are long-standing.
Vauxhall-Opel, much like Peugeot itself, has found itself in motoring’s ‘squeezed middle’ for almost a generation. Budget marques from Eastern Europe (Dacia, Skoda) and the Far East (Hyundai, Kia) now offer high-spec quality at low cost, thanks to labour rates that no-one in Western Europe can hope to match. But for not much more, German luxury brands (Audi, BMW) now produce aspirational, entry-level models. Once-dominant mainstream brands have raised their game, but struggle to compete on either price or prestige. GM tried and failed the budget route (via Korean-made Chevrolets), and unsuccessfully attempted to ditch Opel to its Magna parts supplier in 2009.
The prospect of a Peugeot takeover of a failing American car-maker’s European division, is of course, not without precedent. As discussed in an earlier piece on this site, the French giant picked up Chrysler Europe for a dollar in 1978, and inherited some troubled industrial relations and an ageing product range. Unsurprisingly, the Talbot brand disappeared and the Linwood and Ryton plants closed. How does that stack up versus today’s proposed takeover, though?
The Peugeot-Opel-Vauxhall deal seems to offer considerable overlap: both produce broadly similar models and both are (over-)focussed on a stagnant Western Europe. (By comparison, much of Renault’s recent success stems from manufacturing and selling in the developing world.) It’s rumoured that the tie-up appeals to Peugeot more from the perspective of neutralising a rival and preventing it falling into, say, Chinese hands than any wider synergy.
Whilst it’s well-known that Western Europe suffers from over-capacity, post-merger rationalisation can be a thorny issue. Just as BMW fretted over public reaction to any threat to loss-making Longbridge, Peugeot executives will wonder how bad news for Ellesmere Port or Luton might play out with UK customers; whilst Vauxhalls have been re-badged Opels for many years now (with many models imported) it’s still very much seen as a British brand.
Not all EU discussions relate to the UK and Brexit, of course. How might a future French government view a merger that later impacted both Peugeot and the other PSA Group member, Citroen? And whilst good Franco-German relations might ordinarily trump other considerations, with France in midst of a highly nationalistic election campaign an over-positive outcome for Opel workers might not sit well with voters. How the Germans feel about a French takeover of one of their car manufacturers might well be an issue for their election later this year.
So how might the UK respond? In the short term, there’s been early high-level dialogue between the Government and the PSA Group: let’s see what support and assurances emerge. But the issues of competition and over-capacity have been around for a while, and won’t go away. And things don’t get much better for ‘big auto’, as technology leads us towards electric and driverless vehicles where new entrants, such as Tesla (and even Apple) are already seizing the initiative.
Whilst current debate centres around important specifics such as where might the new Astra model be made: looking more widely, it’s clear that the motor industry is going through momentous change. Although this will largely be driven by companies, successful governments will be those that see these changes coming and adapt to it, from training and education through to manufacturing and infrastructure. Here’s where an industrial strategy might make a difference.
* What Wilson actually told a 1953 Senate hearing was “I thought what was good for our country was good for General Motors, and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country. Our contribution to the Nation is quite considerable.”