Opel purchase makes PSA Europe’s second largest automaker

France’s PSA Group is set to become Europe’s second largest car manufacturer after finalising the acquisition of GM’s European subsidiary Opel, which includes UK automaker Vauxhall, on March 6. But the deal that has created concerns among UK and German authorities for the future the group’s local operations and jobs.

PSA acquired Opel for €1.3bn, and added another €0.9bn for GM Financial’s European operations, the company said in a statement. With a combined 2.3 million vehicles sold in 2016, the deal gives PSA a European market share of 17%, second only to Volkswagen with 23.6%, according to figures from the European Automobile Manufacturers Association.

GM has been restructuring loss-making Opel for years. “We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees,” PSA chairman Carlos Tavares said in the statement.

Despite Mr Tavares’s remarks, leaders from both the UK and Germany have expressed apprehension over the deal for ffear that it might lead to manufacturing job losses in both countries. Germany and the UK operate Opel plants, yet the survival of these jobs is now dependent upon PSA’s discretion.

The UK, specifically, employees more than 3,400 people at Vauxhall plants at Ellesmere Port and Luton. Germany has three manufacturing sites with more than 1,000 employees at each, according to Opel’s website.

As a result, the deal has gained the attention of several top UK policymakers, including Prime Minister Theresa May, who met with Mr Tavares in February.

Ms May’s involvement demonstrates the deal’s importance for the UK in light of the country’s decision to leave the EU by means of a ‘hard Brexit’ strategy. As a means of addressing Ms May’s concerns, Mr. Tavares has publicly pledged his support to maintain the operations of existing Opel manufacturing plants in the UK and elsewhere in Europe.

At the same time, GM’s divestment of Opel embodies growing investor concern with Brexit. The vote to leave the EU means that cars exported from UK plants could be subject to considerable tariffs. Already, automotive companies, such as Ford have threatened to cut engine manufacturing jobs throughout the UK, according to the New York Times.

These threatened job cuts and planned divestments will continue to pose a challenge to Ms May’s administration and other European countries. With the growing rise of Eurosceptic movements, there is concern among investors that there will be a noticeable shift in the regulatory environment of Europe, which may lead to the re-emergence of protectionist trade policies.

The UK is not alone in this emerging worldwide battle to protect manufacturing jobs. Most notably, US President Donald Trump has incentivised auto manufacturers such as Toyota to expand their operations in the US instead of offshoring their investments.

Political leaders across the world like Ms May and Mr Trump are stepping up the fight to protect domestic manufacturing jobs. As a result, it is likely that acquisitions and divestments will be subject to greater political scrutiny in the future.