PSA CEO Brushes Aside Brexit With Vauxhall Expansion in U.K.

(Bloomberg) -- PSA Group Chief Executive Officer Carlos Tavares played down concerns about Brexit as he unveiled a plan by the French carmaker to invest in a factory near London in a bid to revive the Vauxhall brand it acquired last year.

“We are hearing many remarks from the U.K. government that make us think that they are negotiating with the European Union to limit, as much as possible, future trade barriers,” Tavares said on Wednesday. “Among all the uncertainties we're facing right now, Brexit isn't the strongest.”

The maker of Peugeot and Citroen cars will invest about 100 million euros ($123 million) to raise capacity at a factory in Luton to 100,000 vehicles annually, Tavares told reporters on a call after visiting the site. The decision was made after PSA reached an agreement with U.K. unions. The plant produced 60,000 Opel-Vauxhall Vivaro medium-sized vans last year.

Increased production at Luton is a boon for U.K. Prime Minister Theresa May amid concern that manufacturers may cut jobs and move production out of the country as it leaves the EU. Tariffs and other hurdles to trade after Brexit could crimp auto output since parts routinely move across borders several times during the manufacturing process. The prospect of Brexit has sharpened focus on competitiveness at PSA's factories in the country, Tavares told Bloomberg last year.

Safeguard Jobs

“Vauxhall's decision to invest in the U.K. is testament to the world-renowned expertise of the British automotive industry and workforce,” May said in a statement, adding that the company has agreed to safeguard 1,400 jobs. The decision to produce the Vivaro's next generation in Luton was “secured in part thanks to the 9 million pounds of government funding.”

On the call with reporters, PSA's Tavares also raised the possibility the company would hire between 300 and 400 more workers at the site if demand for commercial vehicles grows as planned.

PSA purchased the Vauxhall and Opel marques last year from General Motors Co. for about 2.2 billion euros ($2.7 billion) and Tavares has pledged to turn both around. In order to boost output in Luton, the manufacturer is planning to pick up spare capacity by ending a venture at the site between the Vauxhall brand and French rival Renault SA, according to a spokesman. Renault makes its Trafic vehicles on the same platform.

Vauxhall has been building largely identical cars to models designed by Germany-based Opel. It also operates a factory in Ellesmere Port, England, that makes the Astra hatchback and station wagon.

The plan for Luton will come as a signal for Opel labor unions, which are in the midst of tough negotiations with PSA in Germany to cut jobs and reduce work hours after almost two decades of losses. In its statement, PSA praised the “responsible social dialogue” with the U.K.'s Unite union guaranteeing production flexibility, and also the support of the UK and local governments.

To contact the reporter on this story: Ania Nussbaum in Paris at anussbaum5@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, Andrew Noël

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