Employees at the luxury automaker Opel, owned by
General Motors Company
), are now in a "do or die" situation. The company has asked them
to accept the turnaround plan to save the struggling European
unit or face an early closure of Bochum plant in Germany.
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Last month, the automaker announced plans to suspend car
production at Bochum, located in northwestern Germany, by the end
of 2016. The plant manufactures Zafira compact multi purpose
vehicle (MPV). Opel management started discussion with German
employees in June last year to reach a resolution that would
guarantee significant savings and flexibility to the company.
If the company fails to reach a deal with the employees, the
company's Plan B decision would significantly add to the surging
unemployment in Europe as the Bochum factory employs nearly 3,000
workers. In the absence of a resolution, the plant would be
closed on Jan 1, 2015, after the agreement to keep the plant open
expires. Opel operates three more plants in Germany.
Late December, Opel announced plans to sell six facilities in
Europe to GM in order to win extended funding. The transaction
includes an engine plant in Hungary, a development center in
Turin, Italy, and a facility in Gliwice, Poland. The decision
will help the Ruesselsheim, Germany-based automaker receive
funding till 2016. Opel is obligated to pay back a loan to GM by
A few months back, Opel also announced to cut its
administrative workforce by 30% or 1,000 jobs at its Ruesselsheim
headquarters in Germany as part of GM's 10-year plan "Drive Opel
2022" that include reduction in personnel costs. Opel also shut
down two plants in Britain, located in Ellesmere Port and Luton.
The move had idled 3,000 workers at the plants.
Opel faces weak car sales, high fixed costs and excess production
capacity. These resulted in a total loss of $17.3 billion since
1999 due to uncompetitive models and weakening European market.
Therefore, the company's turnaround plan incorporated cost
reduction measures, new model launches and efforts to boost
In the first half of 2012, Opel's loss amounted to €938 ($1,200)
per vehicle sold, according to the CAR Center of Automotive
Research at the University of Duisburg-Essen. Opel expects to
report an operating loss between $1.5 billion and $1.8 billion in
In order to reverse the 12 years of losses in Europe,
particularly from the Opel brand, GM formed a global alliance
PSA Peugeot Citroen
). The pact will help both the automakers reduce at least $2
billion in costs. In order to strengthen the market position, GM
also plans to expand Opel's lineup by introducing 23 models by
Apart from GM, the present Euro zone financial crisis has
affected the operations of many global automakers, such as
Ford Motor Co.
Honda Motor Co.
GM, a Zacks Rank #3 (Hold) stock, posted a 9.7% fall in earnings
to 93 cents per share (excluding special items) in the third
quarter of the year from $1.03 in the corresponding quarter a
year ago. However, earnings per share in the quarter far exceeded
the Zacks Consensus Estimate of 61 cents.
Revenues in the quarter grew 2.5% to $37.6 billion, surpassing
the Zacks Consensus Estimate of $36.3 billion. Worldwide sales
volume inched up 1.6% to 2.3 million units from 2.2 million units
a year ago. However, total market share declined to 11.6% from
12.1% in the third quarter of 2011.
Operating income fell 11.2% to $1.6 billion from $1.8 billion a
year ago. However, adjusted earnings before interest and tax rose
4.5% to $2.3 billion from $2.2 billion a year ago.