PEUGEOT DEAL PUTS SUCCESS STORY AT RISK

OnE of Britain’s greatest success stories of modern times is the revival of a motor industry which, in the latter part of the 20th century, had become a symbol of industrial decline.

In 2016, production reached its highest level since 1999, with more than 1.7million cars made in the UK, many of them in the luxury bracket and sporting some of the most innovative technology in the world.

Against this buoyant background, it is dispiriting that the American giant General Motors, a stalwart of car-making in Britain since 1925, is upping sticks and selling Vauxhall Motors and its other operations in the UK to French manufacturer Peugeot.

This follows a GM board decision in Detroit to cut itself loose from loss-making European operations.

The £1.9billion transaction is disturbing because of the black cloud it leaves over the longer-term job prospects for the 4,500 people working at the Ellesmere Port factory in Cheshire, and in Luton, at the historic heart of GM in Britain.

The job guarantees offered by Peugeot to the supine Business Secretary Greg Clark look less than robust. There must be serious concerns about the still fuzzy arrangements to protect the rights of up to 15,000 members of the Vauxhall pension scheme.

The Government’s wishy-washy response to the Peugeot takeover is in stark contrast to the still unknown but firmer promises that Theresa May made to Japanese car maker nissan to keep it in Britain soon after she became Prime Minister. The UK is thought to have offered nissan up to £100million of tax breaks and other assistance to keep its European manufacturing in Sunderland.

Of course Peugeot are talking up the takeover, with chief executive Carlos Tavares very positive about the future of the UK operations. But we should treat what he says with a huge dose of scepticism.

Almost every foreign takeover that unfolds in Britain is accompanied by just such sugar-coated commitments. Some of those promises are abandoned within days, such as when Kraft took over Cadbury in 2010. But usually it is a slower process.

As a rule, if companies are forced into cost savings to please investors, or simply to survive, the first jobs to go are those not based in the firm’s home nation, where the political fall-out will be less marked.

In this case, there are already indications that GM and Peugeot have been more interested in offering guarantees to Chancellor Angela Merkel about the Opel facto- ries in Germany. Peugeot has a mixed history as a British motor manufacturer. In 1978, it bought factories at Ryton in Coventry for one US dollar from Chrysler.

In the Eighties and nineties Peugeot manufactured several successful models at Ryton, but by the early 2000s the only car being made there was its most compact offering, the 209, which celebrated production of one million cars in 2004.

By2006, the honeymoon was over despite desperate efforts by the Labour government, and the factory was shut at the end of that year. In 2008 Peugeot was saved from bankruptcy by a bail- out under which 14 per cent of shares were ceded to the French government, and a further 14 per cent to a Chinese investor.

Effectively France’s political leaders will now have a say in the future of GM’s British operations, which cannot be a good thing if jobs are at stake. Peugeot owner PSA says its goal is return Opel and Vauxhall to profit. But to do that it will have to make big cost savings – estimated at £1.47billion a year – with no detail yet as to where they will come from.

Even though Vauxhall’s UK jobs have been ring-fenced for three years, that cannot be guaranteed in the long term given the over-capacity in European carmaking and fears, stoked by French president Francois Hollande, that Britain will be punished for Brexit.

Former business secretary Vince Cable argues that Vauxhall will be particularly vulnerable to Brexit because an estimated 80 per cent of its cars are sold to the EU.

Paradoxically, the Peugeot boss has suggested the reverse, saying that his company will want to keep production in Britain to take advantage of future UK trade deals that could benefit exports.

For example, the United States is the biggest growth market for British-made cars – especially the Jaguar and Land Rover brands – with sales jumping by 47 per cent last year.

One of the most important aspects of this sale to Peugeot will be the arrangements made for Vauxhall pension scheme members. Under the agreement, GM says it will continue to honour pension obligations built up over decades.

The UK’s Pensions Regulator and the trustees of the pension funds will need to be assured that support for the retirement fund is iron-clad.

There is a concerted effort by the British Government and Peugeot to put the best gloss on the Vauxhall and Ellesmere Port takeover, and the future of the British plants. The success stories of BMW (maker of the Mini), nissan, Honda and Indianowned Jaguar Land Rover in Britain ought to be a source of confidence.

But the past record of Peugeot in the UK, and the growing urge to cut costs, should give rise to great misgivings.