GM May Close German Plant Two Years Early as Sales Drop
General Motors Co. (GM), seeing Germany at risk of slipping into recession, may shutter a factory in that country two years earlier than planned as the European auto market sinks for a sixth straight year.
The automaker’s Opel unit may stop building the Zafira van at the plant at Bochum as soon as the end of 2014 when a labor agreement securing production at the plant runs out, Stephen Girsky, GM’s interim European chief, wrote in a letter to employees today. Opel had said previously that the company would probably stop making the Zafira in Bochum in 2016.
“They are trying to get in front of the trouble and have come to the realization that it is a very long road ahead,” Jeff Schuster, an industry analyst with LMC Automotive, said today in an e-mail. “My view is that this is the painful reality of what needs to be done across Western Europe.”
Opel is losing share in the region’s shrinking auto market. Sales of the German brand and Vauxhall sister marque dropped 16 percent in Europe last year. That compares with an industrywide contraction of 8 percent. The Bochum plant has 3,100 workers.
“The situation on the European market is still disastrous,” Girsky wrote in the letter, which called on employees to make contributions to cut costs and ruled out wage increases as long as the company is losing money in the region.
Earlier this month, Chief Executive Officer Dan Akerson told reporters in Detroit that Germany may be slipping into recession.
“A lot of people thought that Germany was probably going to be that cornerstone which was going to see out the troubles of 2012 and probably be fairly stable throughout 2013,” Mark Fulthorpe, a London-based industry analyst with IHS Automotive, said today in a telephone interview. A weakening Germany becomes “a totally different valuation that you’re going to make.”
A German recession would pose an “incremental challenge” to GM’s turnaround plan, Girksy told reporters on Jan. 13 in Detroit. “Germany is slowing down,” he said. “France, Spain and Italy haven’t found a bottom yet. Russia is slowing down; on the other hand, the U.K. is looking a little better.”
GM fell 2.2 percent to $28.63 at the close in New York.
GM Europe has racked up $17.3 billion in losses since 1999 and aims to return to profitability by mid-decade. The U.S. automaker is willing to support Opel financially, if the German operations are set up competitively and profitably, Girsky wrote.
The threat to close Bochum by 2015 is “unacceptable,” the IG Metall union said in a statement following negotiations today with management. The union would “never agree” to permanent wage cuts at the carmaker, Wolfgang Schaefer-Klug, the Opel works council leader, said in the statement.
“Negotiations with the works council are still ongoing,” Johanna Lomp-Knetsch, an Opel spokeswoman, said in a telephone interview. “No decisions have been made yet.”
To adapt production volumes to the lower demand, Ford Motor Co. (F) is closing three European sites, scrapping 6,200 jobs, and PSA Peugeot Citroen (UG) is shutting a plant in the Paris suburb of Aulnay.