Vauxhall has nothing but admiration for UK government business secretary Lord Peter Mandelson in the way that he is fronting the battle with Magna – prospective owner of the haemorrhaging General Motors Europe.
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It’s a tricky one for a politician. He does not want to discourage Magna because buyers of persistently unprofitable car manufacturers are thin on the ground. But he knows that there have to be at least 10,000 job cuts across Europe and that Vauxhall is likely to bear more than its fair share unless he takes a tough line.
Vauxhall has earned it right to live: in the last two years it has improved the cars-per-man performance by 50%. But Magna still want an annual cost saving of at least EUR265m.
What we hear is that he is prepared to dig in on volume and make binding an agreement that guarantees minimum annual production. Once the factory goes below a certain level, it will be buried by its fixed costs.
What we hear from sources directly involved in the negotiations is that Vauxhall was pitching for three shifts for five day a week yielding 200,000 cars a year. In moving to an offer of 150,000 units it was committing to 45 cars an hour as opposed to 40, and a move to a 40 hour week from 38.
Magna was offering 125,000 cars on two shifts. As the reps from Vauxhall, Magna and HMG got together today (9 October), the compromise talks had stalled at 147,000 on two shifts. On continuous working of three shifts, seven days a week, the plant would make 300,000 cars a year.
There is a temptation to accept that. But Mandelson has demanded that number becomes flat line volume below which it will never sink.
Magna has refused. Vauxhall can say nothing. It can hardly bargain hard with its saviour. Mandelson is the only man with muscle as he has the power of veto on the deal, and the purse strings on credit guarantees, regional development grants and training grants.
The total amount of immediate support could reach GBP400m (EUR435m; US$641.4m). In the last 10 years, GBP1bn of taxpayers’ money has gone into the plant through various schemes.
But Vauxhall is boxed in by shorter working hours required by a union that has given plenty over the last few years and did not expect the draconian change that the arrival of Magna would cause.
On the other hand, there is not much to prove that Vauxhall is an essential part of the MOV Group – Magna Opel Vauxhall. It is a very long way from its component supply base, and those suppliers which took business park space on-site have now either moved into Vauxhall-owned space or moved away. The surrounds of the 1962-built Ellesmere Port assembly factory is a waste-land.
Inside the factory though, things are very different to the way they once were. The body shop has been transformed with a EUR16million investment. Robot population is up from 220 to 460. Quality is the best in a GM Europe factory. Paint is world class.
Today, under an extremely tough GM professional trouble-shooter managing director, Tom Schmidt, it is the only plant making the new Astra, and is making them in both left and right hand drive and as both Vauxhalls and Opels.
Ellesmere Port undoubtedly deserves to succeed because of the huge efforts it has made to help itself. It won the right to make new Astra in competition with Germany, Belgium and Poland and was the rank outsider when the race began.
But Magna may not be that impressed. It too has a reputation for introducing operational efficiencies – many of which it invented and which supported the huge growth that has been the Magna story. Magna probably sees Vauxhall as just the first of many plants that have to improve and which will improve under its management.
To UK prime minister Gordon Brown, Vauxhall’s rescue is not just about jobs. It is more about the vision that he created for Merseyside – the vision of Vauxhall making the Chevrolet Volt for Europe – renamed Vauxhall/Opel Ampera. He saw Vauxhall being the cornerstone of a British electric vehicle engineering centre of excellence.
There is bad news on that score. GM is to go on making them in the US only and shipping them to Europe. Whilst the British Prime Minister may have imagined that the 2011/12 on sale date in Europe meant manufacture in Europe, that is definitely not now so. GM says that the low value of the dollar makes export not just attractive, but beneficial while volume is low and the dollar is weak. If – in its role as Europe’s most efficient Astra factory (Ampera is to be on the Astra platform) Vauxhall gets the gig of making Ampera, it will not be until 2015.
The triumph of cutting the ribbon on his own initiative at Ellesmere Port is not going to be available to Brown until after the imminent [mid-2010] election that may be his undoing.
And an Ellesmere Port with no Ampera, and uneconomically low volume of fossil-fuelled Astras, is not one that is guaranteed to go the distance. Lord Mandelson: let’s see a bit of magic.
