AM Online

Jim Saker: Time for industry to face up to some harsh realities

Jim Saker

Over the years I have criticised people for talking down the potential of our sector. As a result, it gives the impression to investors that we don’t have confidence in what we are doing and our strategy for the future. Although my personal stance is positive and that the industry has the competence and the resilience to face the future, I have major concerns about the future of the UK motor industry.

The argument that Brexit delivers no benefits for our industry has been made many times but has been ignored by voters, even in areas where the major employers are car manufacturers enticed into the UK during the Thatcher era on the back of the mantra that the UK was the gateway to Europe. The ensuing redundancies and the reduction in inward investment is undoubtedly negative.

My fear is that we are facing a perfect wave against the industry and this has been enhanced by the announcement of the PSA and FCA combination agreement. Strategically this makes sense at the high level for both organisations. The US market could potentially open up for PSA, which has been an interest for some time. Neither organisation has the individual resources to address the technical challenges of moving to new power trains and the environmental challenges that will be faced over the next decade. By joining together, it gives both companies the chance to be competitive going forward. It is great for them but massively problematic for the UK industry.

Fiat has over capacity but will not be allowed to close factories in Italy, PSA cannot close factories in France and it is almost certain that Opel will get resistance from the German government for any reduction in activity in that country. If Italy, France and Germany are not options for rationalisation then where will the savings be made? Looking at things rationally, the logic will be to shut production in the UK.

If the merger goes through the companies will control 15 brands. There is no logic in trying to put marketing spend behind each of these brands and it would make sense to either shut down or sell off the non-core brands to other manufacturers. Obvious brands that could be separated would be Alfa and Maserati but the one under most threat has to be Vauxhall. Why would a joint Italian/French organisation invest in a uniquely UK brand and production facilities that sit outside the EU when there will be political pressure for them to invest in their own domestic markets?

Nationalism may have been a motivating factor for people who voted for Brexit but that mindset works both ways and if you don’t have the ownership of the organisation within your country then decisions may not be made in your own best interest.

 

Following publication of this article in AM magazine, Jeremy Townsend, UK communications director for Groupe PSA, sent the following response for publication:

"In an opinion article by Professor Jim Saker on the proposed Groupe PSA-FCA merger, he says: 'Where will the savings be made?  Looking at things rationally, the logic will be to shut production in the UK'.

"We refer the professor to the Groupe PSA statement issued on 18th December, we said that the 'merger will deliver approximately €3.7 billion estimated annual run-rate synergies with no plant closures resulting from the transaction'.

"Saker goes on to say that 'the one under most threat has to be Vauxhall. Why would a joint Italian/French organisation invest in a uniquely UK brand.' 

"Vauxhall is one of the five vehicle brands under Groupe PSA and has its own strategic plan for the UK market where, in 2019, sold nearly 200,000 cars and vans achieving a market share of 7.3%."

 



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Comments

  • TjeKvik Nick - 21/02/2020 11:04

    Very good analysis, and it's not just in the actual vehicle production but throughout the supply chain that existing production, new opportunities and jobs will be lost.

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