Car manufacturer Vauxhall announced last week that it will be cutting 400 jobs at Ellesmere Port in Cheshire. Falling car sales figures are to blame. At the same time, the Society of Motor Manufacturers and Traders (SMMT) has announced that investment in the UK car industry is on track to halve this year. Is this the future of the post-Brexit car industry?
Vauxhall is part of the PSA Group, which also makes Peugeot and Citroen vehicles. It has cited the ‘challenging European market condition’ as the reason for the 400 job cuts at Ellesmere Port.
According to PSA, the costs at the Ellesmere Port plant were higher than other ‘benchmark plants’ within the company. Thus Ellesmere Port was first in line when it came to cutting costs in the wake of Vauxhall’s falling sales figures. Vauxhall currently employs some 1,800 people at the plant as part of a total UK workforce of 4,500 people, including the factory in Luton where it makes its vans.
PSA Group became the second largest car manufacturer (after Volkswagen) in August when it bought both Vauxhall and Opel from US car giant General Motors. At the time, Prime Minister Theresa May sought assurances from chief executive Carlos Tavares that there would be no job losses. However, it seems that the situation has changed.
Vauxhall has denied that the move is connected with the current Brexit process, insisting it is about maintaining competitiveness within an industry facing a great deal of change. While SUV sales have grown across Europe, the number of five door estates and saloon vehicles sold has fallen. These are the models manufactured at Ellesmere Port.
The Brexit factor
While Vauxhall may not overtly be blaming Brexit, one cannot help but assume that it is a factor in the recent job loss announcements. According to the SMMT, the UK motor industry enjoyed £1.66 billion of investment last year. So far this year, it has received just £647 million. As such, the overall investment figure for the year looks set to crash by as much as half.
In the case of Vauxhall, PSA Group has said that it is not in “a position to consider future investments.” Part of the reason is that it does not have “enough visibility on the future trading relationship with the EU.” So while Vauxhall may deny that the job cuts relate to Brexit, its new owner is citing that as a direct cause of reduced investment commitments.
The plummeting pound
PSA went on to say that the Ellesmere Port plant currently makes around 140,000 Vauxhall Astras per year. A new model is planned for the early 2020s and its aim is to make the plant more productive in preparation for that model.
However, Professor David Bailey from Aston Business School said that the changing emphasis on SUV models was only a part of the problem. He believes the depreciation of sterling since the Brexit vote is causing big issues for many companies – as are the stalled and somewhat farcical Brexit negotiations.
According to the professor, PSA acquired some 33,500 staff across Germany, Hungary, Poland, Austria, Spain and Italy as part of the recent deal. Cutting costs will be one way of making the company profitable. With the decline in sterling, it seems that the UK arm of the business is the one to suffer first.
The sterling issue, the concerns about future trade deals and the myriad other issues surrounding Brexit have clearly played some part in PSA’s decision. They highlight the negative impact that the apparent chaos of the negotiations is already having.
In fact, the negotiations are so bad that EU diplomats are convincing themselves that it is really some cunning plan to make things appear chaotic, while underneath they are calm and organised. However, closer to home there is no such conviction.
Politicians fighting, a complete inability to agree on anything and the looming threat of ‘no deal’ – there’s little surprise among business experts that companies with a European presence are already looking at their options. Even the President of the EU Commission, Jean-Claude Juncker, has said that he thinks the process will take longer than anyone thought – five rounds in and nothing at all seems to have been agreed (apart from the fact that everyone needs to agree). In the meantime, UK businesses and jobs could start to see the negative effects snowball, with the car industry leading the way.
Are the Vauxhall job cuts a sign of what’s to come for the UK car industry? Will the halving of investment in the industry mean more job losses before the end of the year? Leave a comment to let us know your views.