Vauxhall deal prompts cautious optimism from UK government

Vauxhall's Ellesmere Port factory is known as "the Home of the Astra"

The Business Secretary, Greg Clark, said he was "cautiously optimistic" about the future of Vauxhall following a deal to sell it to a French company.

PSA, the owner of Peugeot and Citroen, has agreed to buy GM's European operations for £1.9bn.

Carlos Tavares, PSA chief executive, sought to calm fears of plant closures but said it was up to workers to increase profitability.

The UK factories at Ellesmere Port and Luton employ about 4,500 people.

Mr Clark said: "The conversations that I and the Prime Minister have had, both with GM and PSA, tell me [PSA] intend to safeguard the plants, honour their commitments and look to increase the performance and the sales of cars.

"We want to hold them to those commitments, but the messages we've had lead me to be cautiously optimistic," he added.

With GM's Opel and Vauxhall operations, PSA Group will become the second-largest carmaker in Europe after Volkswagen.

GM Europe has not made a profit since 1999, but Mr Tavares promised to get the business back in the black once again.

Simon Jack: Vauxhall's fight for survival begins

The fine print behind the GM deal

Why is Vauxhall being sold to Peugeot's owner?

Mr Tavares said: "We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees."

PSA said it expected to make savings of almost £1.5bn a year by 2026, with most of the cuts made by 2020.

Mr Tavares told the BBC that he trusted Vauxhall staff to work in a "constructive manner" with PSA to improve their performance: "As long as we improve the performance and we become the best, there is no risk they should fear."

'Day and night' fight

One worker at Vauxhall's Ellesmere Port plant in Cheshire said today: "I think the deal is good for current GM and Vauxhall employees, but is there a future for younger workers after 2021?"

Next year PSA will decide where it will make the next generation of the Astra, which is built at Ellesmere Port, against the background of Brexit negotiations.

Len McCluskey, general secretary of Unite, said that the union would continue to "work day and night" to fight for Vauxhall staff.

"My call to the government is to make certain that our government is at the table, just as the French and German governments will be, batting for their workforce," he said.

The deal includes GM Finance, which is based in Nantgarw, near Cardiff. The consumer finance division employs about 560 people in the UK and its operations are not expected to be affected by the sale.

Vauxhall workers 'in the dark'

Brexit effect

GM chief executive Mary Barra said it had been a difficult decision to sell Opel and Vauxhall. She insisted the business would have broken even in 2016 had it not been for the UK's decision to leave the European Union, which caused a sharp drop in the value of the pound.

But the Business Secretary, Greg Clark, said the deal had nothing to do with Brexit: "This is a restructuring of the organisation. In my discussions with PSA, the chief executive said today that Brexit isn't an essential driver of this."

"We want to have the best possible trading relationship with Europe, but in any event Carlos Tavares has said that there are opportunities post-Brexit."

Former Business Secretary Sir Vince Cable expressed concerns about jobs because of the government's "lack of commitment to the customs union and the single market".

Professor Christian Stadler, of Warwick Business School, expect jobs to be cut: "PSA has done it before and there is no other way to realistically achieve the cost savings they have in mind, which might possibly mean plant closures as well. Whether this is a Vauxhaul/Opel plant or a Peugeot plant is hard to say at the moment."

Analysis: Simon Jack, BBC business editor

PSA Group says it will cut costs to increase profits, which has stoked concerns for more than 4,000 Vauxhall jobs in the UK.

The new owners met government and unions last week and provided assurance that existing production commitments would be honoured at Ellesmere Port till 2020 and Luton for some years beyond that.

However, it is generally accepted that the 24 factories the combined company will have in Europe is too many.

The deal is an exit from Europe for GM, which has lost billions here since the turn of the millennium. It will allow them to focus on the US and its expanding operations in China.

PSA has said many countries are reluctant to buy French cars and the Opel brand will help them expand into new markets.

The chancellor will have extra motivation to be supportive of the car industry when he delivers Wednesday's Budget. He is expected to announce investment in skills, research and development around electric car technology in which PSA has so far lagged behind its rivals.