In boost for Britain, Peugeot to build new van at Vauxhall plant

LUTON, England (Reuters) - Peugeot-maker PSA PEUP.PA has unveiled plans to raise output at its British Vauxhall van plant, in a pre-Brexit show of confidence that will raise pressure on sister brand Opel's German workforce to offer concessions in labor talks.

PSA, which last year acquired Opel/Vauxhall from General Motors GM.N, will build Peugeot and Citroen models as well as the next Vauxhall Vivaro van in Luton, north of London. Production will rise to 100,000 vehicles from 60,000 in 2017.

The French group, which is locked in labor talks with Opel’s German workers, said the Luton investment was helped by “responsible social dialogue with the Unite union guaranteeing production flexibility”, as well as UK government support.

The union said 350-400 jobs would be created as a result of the investment, which PSA said would amount to about 100 million euros ($123 million). Around 1,400 people are currently employed at the site, which is Britain’s only van plant.

The announcement is a boost to Prime Minister Theresa May ahead of talks to decide Britain’s long-term trading relationship with the European Union, although PSA Chief Executive Carlos Tavares underscored the need for free trade.

“I take on board the assurances that the UK government have provided us on seeking tariff-free and frictionless trade with the EU going forward,” he said at the plant on Wednesday.

“There is still work to do to ensure frictionless trade.”

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The Vivaro, which currently shares underpinnings with Renault's RENA.PA Trafic van, will in future be assembled on PSA's EMP2 vehicle platform.

That will allow production of the Peugeot Expert and Citroen Jumpy to be introduced in Luton, the group said, confirming an earlier Reuters report.

After rescuing PSA from near-bankruptcy in 2013, Tavares is negotiating new union deals for Opel/Vauxhall as he pursues an ambitious restructuring plan designed to restore the division’s profitability by 2020.

Raising pressure on Germany’s IG Metall union, the division’s German CEO Michael Lohscheller underlined that new deals had now been struck with workers in Britain, Spain, Austria, Hungary and Poland, allowing investment in their sites.

The latest UK investment safeguards the Luton plant’s future for “many years to come”, Lohscheller said on Wednesday.

PSA said it needed to boost van output to meet growing demand but could wait until 2020 to decide on future car production at its Ellesmere Port factory in northwest England, where the run of its current Astra Sports model does not end until the next decade.

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The British government is contributing 9 million pounds to the van investment as part of its push to support the UK automotive industry, which employs over 800,000 people and generates revenue of 77.5 billion pounds ($110 billion).

Reporting by Costas Pitas; Writing by Laurence Frost and Costas Pitas; Editing by Mark Potter