Vauxhall sale

The future of Vauxhall’s Ellesmere Port factory is jeopardised by high manufacturing costs and Brexit, according to owner PSA Group CEO Carlos Tavares.

Tavares said Ellesmere Port’s manufacturing costs are double that of PSA’s Sochaux factory in France. “This is striking because the most cost-competitive place to make cars in Europe is not France because of labour costs. When you reach this kind of situation, it creates a risk,” he told MT.

For the factory to make viable business sense, especially with potential extra costs from new trade laws post-Brexit, Tavares said it has to improve its performance by the Brexit deadline.

“We need to set up a plan to improve the manufacturing cost competitiveness of the plant, based on factors such as internal logistics, energy and making the plant as compact as possible.”

Tavares said the severity of the situation at Ellesmere rests on whether the UK embarks on a hard or a soft Brexit. “If it is a soft Brexit, we can still export cars from the UK to the continent, in which case competitors are all the continental plants. We need to catch up with those plants, so the UK needs to improve its quality and cost competitiveness to be able to continue to export in a profitable way. But that’s a soft Brexit, and that’s not going to happen.

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“If it’s a hard Brexit, it’s worse. On top of having to be competitive against continental plants, you will have to overcome the penalty of a customs tax, which puts more pressure on competitiveness, and makes it more demanding. The conclusion is: let’s get back to work because we have two years to fix it.

“When Brexit happens, whatever Brexit it is, this situation needs to be fixed.”

Tavares told MT he was working closely with unions in the UK to protect Ellesmere Port employees.

He said: “If you reach a point that you can be double the operating cost of a French plant, it means the level of demand for that plant we set ourselves in the past 10 years was very low. That rings a bell on the management and union sides because if we want to protect employees, we need to understand that we need to be demanding on our people.

“It’s the best way to respect them – by asking them to work hard to reach a certain number of objectives.”

PSA Group acquired Vauxhall and European counterpart Opel on
1 August. In October, Ellesmere Port announced it would be cutting 400 of the 1,800 jobs at the facility by the end of 2017.

Ellesmere produces the Astra car and PSA also owns a Vauxhall plant in Luton, which makes the Vivaro van.

Image: Press Association