GM tries to reassure U.K. and Germany over Peugeot-Opel talks

LONDON/FRANKFURT, Germany: General Motors has played down the possibility of large-scale factory closures in Germany and Britain following any deal to sell its European brands to Peugeot-maker PSA Group, according to officials in both countries. However, two sources close to PSA told Reuters that job and plant cuts were part of the French carmaker’s ongoing discussions over a potential deal to buy GM’s Opel and Vauxhall brands, with U.K. sites in the front line.

News of the talks between the two automakers earlier this week sparked particular concern in Germany and Britain, where Opel and Vauxhall employ thousands of workers.

The structure of any deal has yet to be decided and it is unclear whether GM might have a stake in the combined business.

Following a meeting Thursday with GM president Dan Ammann, British Business Minister Greg Clark said he had been reassured GM did not intend to “rationalize” its Vauxhall operations in Britain.

“There is some way to go in discussions between GM and PSA but I was reassured by GM’s intention, communicated to me, to build on the success of these operations rather than rationalize them,” Clark said in a statement. “We will continue to be in close contact with GM and PSA in the days and weeks ahead.”

But Britain’s Unite trade union, which met with Ammann and Clark, said it had not received the guarantees it wanted. “There’s no assurances at the moment, this is a story that’s unfolding and we’ll wait to see what the next installment is,” Unite leader Len McCluskey told Sky News.

“My immediate priority now is to understand where Peugeot is now in this process, which is why I am contacting the CEO of the company, Carlos Tavares, to request urgent talks,” he said in a statement.

“It’s much easier to cut jobs in Britain than Germany,” one source with knowledge of the discussions between PSA and GM told Reuters, adding that Britain’s move to leave the European Union was also a factor in the talks. “Restructuring is very likely to happen at the Vauxhall plants,” that source added.

PSA declined to comment.

Separately Thursday, the regional government of Rhineland-Palatinate, home to Opel’s Kaiserslautern plant, welcomed the prospect of a deal with the French as an opportunity to create a “European champion.”

Local politicians too had been reassured by GM executives following a briefing about the deal.

“Politicians in France and Germany have the aim of preventing job losses. There are signals that through the takeover, no plants in Germany will be closed,” Malu Dreyer, minister-president of Rhineland-Palatinate said in a statement.

Analysts have said the rationale for combining PSA and GM’s European brands would be both increased scale and cost savings.

Ratings agency Moody’s said Thursday that acquiring Opel and Vauxhall should eventually help PSA’s credit rating – providing the French carmaker pulls off the kind of turnaround that has eluded GM for years. Doing so would require “substantial restructuring expenses weighing on future cash flow generation,” analyst Falk Frey said in a note.

“The largest obstacle [to] this transaction is the ability of PSA to achieve a turnaround within a reasonable time frame.”

Of GM Europe’s roughly 38,000 staff, about 19,000 are in Germany and 4,500 in Britain.

A version of this article appeared in the print edition of The Daily Star on February 17, 2017, on page 5.




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