GM Building Astra in U.K. Raises Doubt for German Factory

GM’s Opel to Build Updated Astra in U.K., End German Production
Ellesmere Port will be the lead factory in building the Astra, to be introduction from 2015, after workers backed an agreement for improved productivity, Opel said today. Photographer: Jason Alden/Bloomberg

General Motors Co. said it will move production of the next version of the Opel Astra to a plant in England, one of two factories that analysts had identified as in jeopardy, raising the likelihood that the other will be closed.

The automaker will build an updated version of the Opel Astra compact car at a plant in Ellesmere Port, England, while ending production of the model at its Ruesselsheim, Germany, factory, which GM said will remain in full use. The company didn’t say what it plans to do with its factory in Bochum, Germany, which has been regarded as a candidate for shuttering.

“Bochum has no chance in the production system after 2015,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “In my opinion, Bochum will be closed.”

GM has been seeking to end losses in Europe that totaled $16.4 billion since 1999. Chief Executive Officer Dan Akerson, part of the board that decided against selling Opel in 2009, wants to improve Detroit-based GM’s profit margins and strengthen its brands.

The Ellesmere Port site operated by Opel’s British Vauxhall brand will be the lead factory in making the new Astra, to be introduced from 2015, after workers voted to accept proposals for improved productivity, GM said today in a statement.

“Ellesmere Port will become one of the most competitive in the Vauxhall-Opel manufacturing network,” said the automaker, which has 40,000 workers at 11 European plants, 2,100 of them at the U.K. site. “The plant will implement a number of creative operating solutions to improve flexibility and reduce fixed costs.”

GM Investment

GM will invest 300 million euros ($382 million) in Astra production in the U.K. and at an existing site in Gliwice, Poland, while ending assembly of the model at Opel’s Ruesselsheim base, which began building the five-door after a 2010 reorganization aimed at stemming losses.

Capacity at the plant near Frankfurt, which also makes the mid-sized Insignia, will continue to be “fully utilized,” Opel said, without elaborating.

The next-generation Astra will add 700 jobs at Ellesmere Port after workers agreed to new contracts starting next year and running into the early 2020s, according to Opel, which will invest 125 million pounds ($198 million) there and guarantee output of at least 160,000 cars a year.

Workers will move to a three-shift daily work pattern from the current two shifts, and the site will be profitable running at full capacity, the automaker said.

GM Pressure

GM has been pressuring workers at each Opel site for concessions after the European business had an adjusted operating loss of $256 million in the first quarter compared with a $5 million profit a year earlier, Wolfgang Schaefer-Klug, head of the its works council, said May 8, adding that ending work on the Astra in Germany would send “the wrong signal to customers.”

GM’s February accord with Paris-based PSA Peugeot Citroen also raised doubts over Ellesmere Port and Bochum, the oldest Opel plants and in theory the least efficient and most likely to be closed, Dudenhoeffer, the auto researcher, has said.

Bochum, which has 3,100 workers, doesn’t build the current Astra, producing only an older version for eastern Europe, plus the Zafira minivan, and isn’t directly affected by today’s announcement, Harald Hamprecht, an Opel spokesman, said by phone.

“Zafira will be built in Bochum until the end of 2014,” he said. “Beyond that, no decisions have been taken.”

Vauxhall Sales

The Ellesmere Port plant was also regarded as vulnerable because its last home-grown Vauxhall design, the Viva sedan, ended production in 1979, with subsequent models based on rebadged Opels.

Vauxhall sold almost 235,000 cars in the U.K. last year for a 12 percent market share, second only to Ford Motor Co. While Opel sales in Germany were higher at 285,000, that amounted to just 9 percent of the market and a fourth-place rank behind Volkswagen AG, Daimler AG and Bayerische Motoren Werke AG.

U.K. Prime Minister David Cameron said the GM announcement was “excellent news” and resulted from a “team effort” between his government, Vauxhall and organized labor. Business Secretary Vince Cable said GM’s decision was based on “commercial” factors.

‘Completely Committed’

“We haven’t been waving a check book,” Cable said on BBC Radio 4’s “Today” program. “The company felt we in the U.K. were completely committed to this industry. The workforce is flexible. Exchange rates go up and down.”

A few hundred jobs may be created at the Polish Gliwice site to allow for the third shift, while Hamprecht said details have not been decided.

Production of the current Astra started in Ruesselsheim in 2011 with 18,300 cars, as well as 149,800 Insignias, according to company data. The plant also made 12,600 Buick Regals, a re-badged version of the Insignia sold in the U.S., and is due to build 70,000 Astras in 2012, labor leader Schaefer-Klug said.

Turning around operations in Europe will involve a series of actions rather than “a big bang,” GM Chief Financial Officer Dan Ammann said May 3. Opel will stand by an agreement not to close plants before the end of 2014, Karl-Friedrich Stracke, president of European operations, said the same day.

In addition to Ellesmere Port, Ruesselsheim, Bochum and Gliwice, Opel has two more plants in Germany and one each in the U.K., Poland, Austria, Hungary and Spain, where the largest, in Zaragoza, was established in 1982 and employs 6,500 people.

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