‘Hard’ or ‘soft’, Peugeot sees mileage in Brexit

Carlos Tavares (L) and Mary Barra, Chairman and CEO of General Motors, shake hands over the Opel/Vauxhall deal. 6 March 2017. [Groupe PSA/Twitter]

French carmaker PSA, which this week bought Opel and Vauxhall in a bid to create a European champion in the auto industry, must still face the uncertainty of Britain’s withdrawal from the European Union.

The group believes, however, that even a so-called ‘hard’ Brexit, in which Britain would leave the single EU market, could be a “very nice opportunity”.

PSA announced on Monday (6 March) the acquisition of General Motors’ European subsidiary, which includes Germany’s Opel and Britain’s Vauxhall, for €1.3 billion ($1.38 billion).

The takeover will see PSA regain its position as the second-biggest car manufacturer in Europe after Germany’s Volkswagen group, overtaking its French rival Renault.

British Prime Minister Theresa May is due to trigger Article 50 by the end of March, starting the two-year EU divorce process.

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Brexit, ‘a very nice opportunity’ for Vauxhall

“Brexit is interesting because nobody knows how it’s going to unfold,” said PSA Chief Executive Carlos Tavares.

A hard Brexit would see Britain’s departure from the EU’s single market or tariff-free zone, while ending the free movement of people.

In a more amicable, or soft Brexit, Britain might retain at least some access to the single market in return for free movement of people.

“If it’s not a hard Brexit, then everybody will be happy because if it’s not hard then the markets will be in a better shape and everybody will benefit from it,” Tavares told a news conference.

In that situation, it will be all about “performance”, allowing PSA “to be competitive in the UK against all the other regions, all the other countries”.

“It can be an opportunity that can be strengthened, eventually by the weakness of the pound.”

Britain is Opel’s largest European market, where vehicles are sold under the Vauxhall brand. It also employs about 5,000 people in Britain, most of them in two factories located in Ellesmere Port in northwestern England and Luton in the southeast.

But even a hard Brexit could be “a very nice opportunity” for Vauxhall’s supply chain “to be able to source the UK from the UK”, according to Tavares.

“In that situation… possibly it is important that we can source parts from the UK. So that the cost structure will be more in pounds, as much as the revenue structure.

“So if it’s a hard Brexit, then of course the supplier basis needs to be developed, and I think this is something that the UK government completely understands.”

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GM blames Brexit

In London, a Downing Street spokesman was asked on Monday about reports that PSA was keen to keep a plant in Britain in case of a hard Brexit, to protect themselves against potential tariffs.

He said he was not aware of this issue being mentioned in conversations between London and PSA.

“The company themselves have said this morning that Brexit was not the driving factor behind the decision,” he said.

For Len McClusky, the secretary-general of the Unite trade union, “there is also a role for the government to play. The uncertainty caused by Brexit is harming the UK auto sector”.

Last year, some 1.72 million cars were assembled in Britain, 8.5% more than in 2015. Eight out of ten have been exported. Among those shipped abroad, 56% were to the European Union.

GM’s chief executive Mary Barra blamed the June Brexit vote and the ensuing fall in the value of the pound for 2016 losses. The group had been hoping for a return to profitability for Opel and Vauxhall, but it ended up reporting a loss of $257 million.

She said the financial results for its European subsidiary “have improved dramatically” in recent years.

“It’s clear that the team would have hit the goal of breaking even in 2016 had it not been for Brexit.”

Opel and Vauxhall have booked repeated losses in recent years, costing the Detroit-based GM around $15 billion since 2000.

Pro-EU carmakers say plants not at risk from 'Brexit'

Britain’s foreign-owned carmakers, strong supporters of the open markets created by its membership of the European Union, would not shut their plants were the country to leave the bloc, though future investment could be at risk, executives have said.

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