Is Opel/Vauxhall’s announcement of production cuts in Germany affecting UK-bound cars the General Motors Europe’s unit’s way of warning us the sole remaining GM car plant in England is at risk? Or is this simply, as a Vauxhall spokesman told just-auto, a prudent automaker looking ahead, foreseeing an inevitable sales decline and making a measured plant output adjustment in full cooperation with all affected parties? I’ll go with the latter. For now.
Here’s Opel’s matter-of-fact statement in full (there’s been a hint the statement was issued after a confidential chat between the automaker and plant works management councils was leaked to German media): “We can confirm that there will be short-time work in the plants in Rüsselsheim and Eisenach during the course of this year. We cannot confirm the exact number of days. This will depend heavily on the sales volume of the Insignia and the Corsa in the UK. For both vehicles, the UK is the biggest market. The Brexit situation is an issue for everybody who does business in, and with, the UK at the moment and we already announced last month that there will be an impact on our European financial performance if the value of the pound remains at its current level for the rest of the year.”
Here’s additional background from Vauxhall here in the UK: “Opel was being prudent by anticipating a potential fall in September industry volume due to falling consumer confidence in what is expected to be the year’s biggest sales month (a sales-spurring number plate identifier changes twice a year in the UK – 1 September will see the arrival of the ’66 plate’ cars).”
That all makes sense to me. For most of this year, Britain’s automakers lobby group, the SMMT, has predicted a growing levelling off of the strong growth seen in recent years. UK new car registrations for 2015 were a record 2.6m units, sealing four years of consecutive growth, the SMMT said back in January. Chief executive Mike Hawes said at the time: “The new car market defied expectations in 2015, hitting an all time record driven by strong consumer and business confidence. Buyers took advantage of attractive finance deals and low inflation to secure some of the most innovative, high tech and fuel efficient vehicles ever produced. The past four years have seen a remarkable period of sustained growth, and the outlook remains positive with every reason to expect the market to hold broadly steady in 2016.” In other words, a flat market and a likely leveling-off of growth.
At that stage, automakers knew the Brexit vote (which would prove to be highly controversial and the ‘leave’ outcome a surprise to most) was coming but, in the meantime, there was yet more good SMMT news to follow: record UK output as British manufacturers made more cars in 2015 – 1,587,677 – than any year since 2005 when 1,595,697 vehicles were produced. Fast forward seven results months, and the prognosis was a little more gloomy: “UK new car registrations inched up 0.1% last month [according to the SMMT],” we reported. “Some 1,599,159 new cars have been registered so far this year, putting demand in the year-to-date 2.8% higher than for the same period in 2015, following a strong first quarter.”
Then the chilly bit: “After a healthy start to 2016 and record registrations in 2015 the market is showing signs of cooling,” [said Hawes]. “The automotive market is a vital part of the British economy and it’s important government delivers the economic conditions which instil business and consumer confidence. With low interest rates, attractive finance options and exciting new models coming to the showrooms, the market still has lots to offer customers.”
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Vauxhall’s July sales here in the UK were up nearly 17% year on year to 19,733 units and market share rose from just under 9.5% to just over 11%. The year to date tally, on the other hand was off by a bit over 4% to 152,860. Market share? 9.6% vs 10.2%. Arch-rival Ford’s sales dipped last month – by 7.6% to 22,247 – with market share falling to 12.5% from 13.5% in 2015. YTD sales were down 3.9% to 193,439 with market share down to 12.1% from 12.9%.
Both Ford and Vauxhall have similar, long histories in England. Ford started early in the 20th century as a Manchester-domiciled, Old World car-making outpost of Henry Ford’s fledgling New World-based carmaking empire on which, like the British empire, the sun never set for much of the 20th century. Vauxhall, originally of London circa-1903, soon moved to break ‘green field’ ground at Luton, where it remains based today, and was absorbed into the vast General Motors conglomerate, along with Opel, a couple of decades later. In England, both grew to supply both the UK and far-flung Commonwealth export markets while having a crack at the US and Europe; Ford with its vast Rouge-emulating raw-materials-to-finished-cars complex at Dagenham (and later factories at Halewood, Southampton and west London), Vauxhall with a vast factory footprint at Luton, Dunstable (Bedford commercials) and Ellesmere Port.
Both, too, have been through the wringer in recent years as European sales and profits declined and survival depended on brave, hard-hearted restructuring and ‘right sizing’. Today, Ford UK’s three vehicle factories in UK are either closed or sold, its vehicles shipped in from across Europe and as far away as Turkey, India and the US. Its Belgian factory in Genk closed – with the loss of thousands of jobs – in 2014, with European production consolidated in Germany and a revamped Valencia plant in Spain. Vauxhall’s original Luton plant is now cleared ‘redevelopment’ land, the buildings demolished (though the newer joint venture van plant remains) and Ellesmere Port hangs on to simple assembly (of largely imported components) of a single line of Astra hatchbacks and wagons. Ellesmere Port won the stiff competition to be ‘lead plant’ for current Astra, but GM in Europe has a pan-European supply network so anything that adds to shipment costs between UK and EU threatens to make GM reconsider the plant’s position when the next generation model comes around. Local content is only around 25% (the company is trying to boost this), with the rest of its bits coming from Europe, so anything – like a low value pound – that adds to the risk of higher trade costs between UK and Europe only makes it more likely that GM will opt to put more investment into Europe rather than the UK when the next business case needs to be made for a model to be assembled at the Port.
All that said, the pain for the companies (and their laid-off workers) over recent years has paid off as recent quarterly results have, finally, reflected the welcome return of the word ‘profit’ in both automakers’ European unit results.
So now, Brexit, the final effects still firmly in the ‘unknown’ basket (the UK’s new prime minister had yet to announce even a date for the start of the official exit process at the time of writing). The auto industry is gloomy at the ‘leave’ result, the Opel-worrying pound, which dipped alarmingly post-Brexit, is only inching back up, though stock market losses, largely, have recovered. Consumer confidence appears mixed. Predictions, optimistic and pessimistic, still abound in this green and pleasant land.
Which brings us back to Opel. A sensible, well-reasoned decision to maybe slow the lines a bit if British sales continue to slide? Or a subtle warning Ellesmere Port may soon be on the chopping block?
It’s simply too soon to say.