Impact: GM to close Opel Factory in Germany? image

General Motors Co. is preparing to disclose “horrendous” fourth quarter losses out of its European Opel/Vauxhall unit. Steep losses may now result in factory closures and layoffs, including the Opel factory in Bochum, Germany, according to media reports.

“There is increasing frustration with Opel and a feeling that the cuts two years ago did not go nearly deep enough,” it quoted the official as saying.

“If Opel is going to get fixed, it is going to get fixed now and cuts are going to be deep.” the Wall Street Journal said on Wednesday, quoting a GM official.

In the report, the WS Journal says General Motors is looking at the possible closing of two factories: Bochum, Germany, which has 3,100 employees, and Ellesmere Port, England, with 2,100 workers.

GM’s most recent European cost-cutting was not enough. In the seven years preceding its 2009 bankruptcy, GM Europe had lost an average of about $1 billion a year. The company cut about 8,000 jobs and got workers to accept annual wage and benefit concessions to save hundreds of millions of euros.

Indeed GM posted a $102 million net profit in Europe for the second quarter, reversing a $160 million loss a year earlier – but the company fell short of expectations, losing money in the third quarter.

Now, GM, in addition to pushing for production cuts, is looking to reduce materials costs, save money on suppliers and reduce waste within the company, a person familiar with the situation said.

Opel workers are likely to fight hard to prevent job cuts or factory closures. Wolfgang Schäfer-Klug, who became the new works council head in January, already promised to secure a 2.7 percent pay raise for Opel workers, spiegel.de reported last week. But how …

Situation in Europe
Europe’s car market suffers from 20% to 30% over capacity. Demand is set to shrink by either side of 5% this year.

Car sales in Western Europe fell by 8.7% year-on-year in January according to data released by LMC Automotive.

That following declines of three percent in November and nearly 1.4 percent in September.

The Brussels-based Association of European Carmakers said registrations ended the year 1.4 percent lower at 13.6 million.

Germany was the only major market to post growth in December.