ANALYSIS: Fear and loathing in Luton
- Ellesmere Port's future looks secure after investment and modernisation
- Ellesmere Port earmarked for Ampera hybrid production
- Prospects for IBC plant at Luton more shaky as Renault-Nissan considers van sourcing changes
- Luton may nevertheless be viable as a flexible multi-model assembler for Magna projects
The Luton van plant is at serious risk of closure in the wake of GM's forced sale of Opel/Vauxhall to Magna and its Russian finance partners, writes Mark Bursa
How ironic for UK Trade Secretary Peter Mandelson that the moment GM Europe is sold into an uncertain future, he has to spend the day fielding questions about the demise of Rover.
The publication of the investigation into the Phoenix Four's shenanigans couldn't have come at a worse time. Here's a vision of what can happen when you sell a car company to the wrong owners. It'll not ease the fears of Vauxhall staff at Luton and Ellesmere Port, two of the GM Europe plants most at risk from the Magna/Sberbank axe.
As for Mandy, and his beleaguered boss, UK Prime Minister Gordon Brown, they're likely to pay a heavy price for indecision over the fate of Vauxhall. Both Brown and German Chancellor Angela Merkel face a general election in the near future. The difference is that Brown appears resigned to defeat next May, when his term of office expires.
Merkel believed a grand gesture might get her re-elected. By putting up US$6bn in guarantees in return for forcing GM to sell out to Magna, Merkel has ensured that the job cuts in Germany will be minimal. The German plants are Opel's most costly and inefficient, yet they will be spared the axe. Modern plants in Poland and Spain are also seen as essential. So if there are to be closures, they'll fall elsewhere in GME. The Antwerp plant in Belgium has been doomed from day one - but if anything else is to go, it's almost certain to be in Britain.
Of GM's two UK plants, Ellesmere Port looks the most secure. It's been modernised and is one of the most efficient in GME. And the UK Government - whether it be Labour or, as expected from mid-2010, Conservative, will stump up money for 'green' projects. And the word is that Ellesmere Port has been earmarked to build the Opel/Vauxhall Ampera range-extender hybrid, backed by UK government wedge.
Ampera was one of the main stumbling blocks of the Magna deal. GM's Detroit management does not want this technology to fall into enemy hands - and there were fears that the Russian backers would simply steal the system. You can bet there are some ring-fence elements to the deal - it's even possible that GM US could retain a plant in Europe just to build the car, thus keeping it out of the alliance. GM could sell it in Europe as a Chevrolet Volt (as in the US), but Chevy is still a fledgling brand in Europe. The project needs the Opel/Vauxhall volumes and distribution in order to justify the volumes.
Whatever happens, Ellesmere Port is likely to survive. Vauxhall has a substantial UK market presence, and it's seen as every bit as much of a British brand as Rover. Ending UK production would put that in serious jeopardy. There's also 'natural currency hedging' in having substantial manufacturing operations in stubbornly staying outside the euro and sticking with sterling Britain.
The situation at Luton is a lot more shaky. The big car plant is now long gone - all that remains is the IBC plant, which builds vans as part of an agreement with Renault. This is not a firm JV like the Fiat-PSA SEVEL project. It's a looser agreement, established a decade or so ago, which gives GM access to Renault's van designs, in return for contributing a manufacturing base - IBC - for the smaller vans.
IBC builds Renault Trafic panel vans for Renault, Nissan and the two GM brands, which sell it as the Opel/Vauxhall Vivaro. The larger Opel/Vauxhall Movano is a version of the Renault Master, and these are built in France.
The current agreement to build Vivaro at Luton runs out in 2013, but reports suggest there is a get-out clause allowing Renault to pull out if the Luton plant changes hands. The official line is that Renault is "studying the implications" of the GME sale. In reality it would be simple for Renault to pull out without interrupting its own supplies of Trafics (or of supplies of the Primastar, Nissan's version).
This is because Nissan's Barcelona plant is also tooled up to build the Trafic. In fact, Barcelona builds high-roof versions for Renault, Nissan and Opel/Vauxhall, because the IBC plant, originally built for smaller vehicles such as the Bedford Midi and Rascal, cannot accommodate the larger bodies.
The van market is depressed at the moment, and that would allow an easy switchover of all Renault and Nissan production to Barcelona. In the longer term, there were serious doubts as to whether Renault would stick with Luton. At Geneva Show earlier in the year, Renault said the Sandouville plant in northern France, which builds Espace and Laguna, would take on light commercial production in the future.
The next-generation Trafic is likely to share its platform with the next-generation Espace, so it would make sense to bring the production together. The platform economies of having two models off the same platform would counterbalance the effect of losing the GM supply. And under this scenario, Luton would be without a vehicle to build - and Opel/Vauxhall would be without a van range.
Is there an alternative future for Luton? Perhaps. Magna's expertise is in contract manufacturing, and Luton is the sort of flexible, multi-model plant that would fit its profile. Magna has ambitions to build electric and hybrid cars using its own technology, which it would supply as a third-party contractor to other automakers. Luton might be an ideal location for such a plan - iIf such a plan comes together. Already there are mutterings from other automakers that they would be less keen to outsource to Magna now it's no longer a 'Tier 0.5' contract assembler, but a full-blown automaker. Magna might have won the battle for GM Europe, but it could lose clients as a result.
If Opel/Vauxhall wants to stay in the van market, Magna might need to source a replacement for Vivaro if Renault pulls out, and Luton is well-equipped to build this - though the Zaragoza plant in Spain, which makes the smaller Opel Combo, would also be in the running.
As a more extreme solution, Sberbank's partner GAZ is a van maker and does own the intellectual property of the old LDV Maxus vans, though it's hard to imagine Vivaro customers remaining loyal to the Opel/Vauxhall brand if the agricultural Maxus were offered as a replacement - even with a substantial facelift.
These details have not been considered in the political wrangling at the heart of the GME-Magna deal. Indeed, why should Angela Merkel care what happens in the UK? Her actions will probably win her another term as German chancellor. Job done.
The UK Government may have pumped billions into the ailing UK banks, but Brown, Mandelson and co have taken a back seat in the affairs of its automakers during the recession. Market forces have prevailed, and so far the only casualty has been LDV. But if Luton is to be preserved, some money needs to be forthcoming. Reading between the lines, you can see that the "concession" from Magna will be to keep Ellesmere Port, but to cast Luton aside, a deal which will test Mandy's spinning skills if it's to be portrayed as a victory.
The Magna deal is already starting to look like a rotten one for the UK, and despite GM's retained 35% stake, Opel/Vauxhall is now an 'orphan automaker' with a brand that has no global presence and new owners whose ability to fund the future is uncertain. Rather like Rover a decade ago, in fact.
Mark 'Coolbear' Bursa