Opel/Vauxhall reduce dealers, JLR cut jobs and move East [updated]

Update April 23, 11AM CEST: On Friday 20 April, Nissan also announced that it would be cutting jobs in its Sunderland plant - the biggest car manufacturing site in the UK - due to the falling sales of diesel models. According to The Guardian, local reports suggested long-serving staff may be asked to take voluntary redundancy. The British newspaper also reports that the Unite union said there would be no compulsory redundancies at the site, which employs 7,000 people and builds the Qashqai, Juke and Leaf.
 

 

Brexit uncertainty and the shrinking sales in major markets like the UK are causing major carmakers to cut costs and take severe measures. Jaguar Land Rover announced last week they would cut 1,000 jobs at their domestic manufacturing facilities. At the same time, the company is currently hiring over 1,000 employees for its brand-new Slovakian plant, which will start building cars by the end of this year.

 

A few days later, the PSA-owned Opel/Vauxhall stated it would drastically reduce the number of dealerships and impose new terms. All of the 1,600 European dealers will receive a letter terminating their distribution contract by the end of this month, with a two-year notice. Insiders believe that, depending on the market, up to a third of the dealer network would not sign a new agreement.
 

JLR’s restructuring will mainly affect workers of the Solihull plant near Birmingham, which currently employs 10,000 people and builds the Range Rover, Range Rover Sport, Range Rover Velar, Land Rover Discovery and Jaguar F-Pace. The Halewood plant near Liverpool, which produces the ageing Range Rover Evoque and the Land Rover Discovery Sport, is scaling back production as well.

In last week’s statement, the Tata-owned company said that it continues to recruit large numbers of engineers, graduates and apprentices as it invests in new products and technologies, and remains committed to U.K. plants in which it has spent more than 4 billion pounds since 2010.

Still, Jaguar’s latest models, the electric I-Pace and the Evoque-based E-Pace, are built by Magna Steyr in Austria – a decision that was made long before Brexit and indeed a blessing in disguise. The car maker is also investing €1.4bn in a brand-new plant in Nitra, Slovakia, which will have a capacity of 150,000 units. It took the decision back in 2015 and considering the current climate, experts expect JLR to move even more production to Eastern Europe.

The UK is Opel/Vauxhall’s largest market, but sales have been slipping dramatically. Last year, PSA’s Anglo-German subsidiary saw demand for its models fall by 22 percent, whereas the overall market went down 5.7 percent. In the rest of Europe, Opel sales fell as well, albeit less sharply.
PSA confirmed yesterday that Opel would give all of its 1,600 European dealerships a two-year’s notice by the end of this month. The group intends to retain a maximum of Opel and Vauxhall dealerships, but insiders believe that in some markets, like the UK, just two thirds of them will sign a new contract in 2020.

The new deal combines passenger vehicle and LCV sales in one single distribution agreement  - today they are the subject of different contracts – and is to compensate performance rather than compliance with standards. ‘Instead of paying margins to dealers for the fulfillment of certain requirements, in the future we will pay performance-related bonuses that target sales figures and customer satisfaction,’ Opel’s sales and marketing chief Peter Kuespert told Automobilwoche.

‘We are counting on our dealers even more to drive our commercial vehicle offensive. We still see great potential in this financially attractive segment,’ he added. However, smaller dealers are unlikely to invest in LCVs if they haven't already done so and will probably not remain part of the official network.