Opel continues to flounder as sales plunge.
With its sales down 15% for the year and the situation likely to get worse, General Motors’ floundering Opel brand will slash production at two of its key German plants.
Several thousand workers will be idled for at least 20 days through the end of the year, the maker announced after reaching an agreement with its union, the powerful IG Metall. The move is likely the first in a series of steps that Opel will take as it heads towards a broader reorganization being crafted by GM Vice Chairman Steve Girsky, who was named interim chief of European operations earlier in the year.
The European automobile market is declining dramatically,” Opel’s head of personnel, Holger Kimmes, said in a statement explaining the company’s need to slash production.
GM lost $747 million last year on its European operations and Opel was a primary factor in a 40% slide in the maker’s second-quarter 2012 profits. In all, Europe is expected to run up losses of as much as $2 billion for GM for all of 2012.
The maker is by no means the only one in trouble. Its alliance partner PSA Peugeot Citroen is expected to ask for a French government bailout. And other European makers, such as Fiat, have seen earnings tumble, often deeply, into the red this year as car sales plunge in the wake of the Continent’s continuing economic problems.
But Opel has its own set of problems that are all but certain to make this the subsidiary’s 13th year in a row in the red. It is struggling to rebuild a weak brand image, waiting for critical new products such as the Adam small car, and weighed down for serious overcapacity issues.
Girsky has been able to negotiate only a partial solution to the latter issue, with a factory in Bochum to close by 2016. But analyst Brian Johnson, of Barclays Capital, called that only “a stopgap measure.” Most analysts believe the maker needs to shutter two, perhaps three plants, to bring capacity in line with shrinking demand.
The industry, as a whole, had an estimated 10 more plants than it needs to meet capacity – even before this year’s plunge in sales.
Under the new plan, Opel will halt production for 20 days at its key Ruesselsheim assembly plant, as well as the Kaiserlautern parts plant, through year-end. The move will go into effect next month. Workers will receive as much as two-thirds of lost wages, however, through a German government program called Kurzarbeit – or short work.