'Dire' Market Conditions GM Reportedly Closing Two European Plants

General Motors appears to be losing patience with its ailing European subsidiary Opel. According to media reports, the US carmaker plans to close up to two plants in Europe. Bochum in Germany and Ellesmere Port in Britain apparently top the list for the cuts.

Opel's Eisenach plant: There appears to be no light at the end of the tunnel for the German carmaker.

Opel's Eisenach plant: There appears to be no light at the end of the tunnel for the German carmaker.

The future of General Motors' European subsidiary Opel has been in doubt frequently in recent years. GM almost sold Opel in 2009 but backed away from the deal at the last moment.

Recently, however, there have been rumors of plant closures in Europe as a result of GM's frustration with mounting losses at Opel and its sister company Vauxhall. Now those plans appear to be taking concrete form. On Friday, the Wall Street Journal and the Reuters news agency both cited insiders saying that GM's Opel managers are planning to shutter to two plants in Europe.

Next Wednesday, Opel managers will present a business plan to the unit's board that apparently foresees the closure of two plants, reducing production capacity by 30 percent. According to the Wall Street Journal, the plans could be completed and made public within the next couple of weeks. The locations that are in greatest danger of closure are apparently Bochum in Germany, which has around 5,000 employees, and Ellesmere Port in the United Kingdom, which has 2,100 workers.

Reuters quoted a member of the supervisory board from the labor side as saying that GM had complained about an annual excess capacity of 500,000 cars, which translates into two plants too many. "The new head of manufacturing has been visiting one site after the other, playing them off against each other," said the unnamed board member. According to the source, the main points of the business plan to be presented next week are "plant closures and no growth of the company."

The news agency also quoted an unnamed GM source who said that no decision had been made on closing European plants, but that that market conditions in Europe were "pretty dire" and action had to be taken as a result.

Protected from Closures

GM's European operations, which consist of Opel and Britain's Vauxhall, made losses of almost $750 million (€570 million) in 2011. There have been repeated rumors in recent months that GM might want to sell Opel or close the Opel plant in Bochum.

But Opel is protected by an agreement that prevents any plant closures or lay-offs before 2014. The agreement was reached by management and unions two years ago in exchange for labor representatives agreeing to strict cost-cutting measures. A total of 8,000 jobs were cut at the time and the plant in Antwerp, Belgium, was closed.

In addition to the Bochum plant, Opel has facilities in Rüsselsheim, Eisenach and Kaiserslautern, employing a total of about 40,000 workers in Germany.

In 2009, General Motors had a deal in hand to sell its European unit. But at the last moment, despite months of negotiations facilitated by the German government, the American automaker backed away, deciding to restructure the company instead. The decision infuriated Berlin and led many in Germany to doubt the company's integrity.

dgs - with wire reports


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