General Motors Company
) ill-fated European arm, Opel has decided to axe its operations in
Britain on the back of a weak auto market in Europe triggered by
mounted government debt.
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Opel plans to shut down two plants in Britain, located in Ellesmere
Port and Luton, for a week beginning on September 24. The move will
idle 3,000 workers at the plants. However, they will continued to
be paid during the shutdown and their work hours will be banked for
Both the plants manufacture Vauxhall branded cars for the U.K.
market. However, most of the output from the plants is exported to
Europe under Opel branding.
Late-August, Opel announced its plan to cut work hours of thousands
of workers at two of its four plants in Germany in response to a
sluggish demand for cars in the troubled Europe. The company will
reduce work hours at its main facility in Ruesselsheim and its
component plant in Kaiserslautern for 20 days between September and
the end of the year.
The move will affect half of 13,800 workers in Ruesselsheim,
especially those in production lines and administration. On the
other hand, it will affect 2,500 workers at the company's
Opel lost $747 million last year due to weak car sales, high fixed
costs and excess production capacity. This resulted in a total loss
of more than $12 billion in 12 years.
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. Its deliveries in
Europe dipped 15% to 457,630 vehicles due to weak demand emanating
from the debt-crisis in Europe and strong competition from Asian
In December last year, Opel had revealed that it expects to report
an operating loss of €1 billion ($1.3 billion) in 2012 due to fewer
car sales than anticipated. The unit expects to sell 1.4 million
vehicles in 2012, which are about 100,000 units less than the
earlier projected sales.
In order to reverse the 12 years of losses in Europe, particularly
from the Opel brand, GM formed a global alliance with
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
2016, including the Mokka compact crossover in October.
The present Euro zone financial crisis has affected the operations
of many global automakers, especially GM and
Ford Motor Co.
). Both the automakers have a significant exposure to the market.
Ford expects to lose more than €1 billion in Europe. It has already
cut back production at its Cologne-based plant in Europe in May and
June that affected 4,000 workers.
GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in
profits to $1.49 billion or 90 cents per share in the second
quarter of the year from $2.52 billion or $1.54 in the same quarter
of 2011. Nevertheless, profits exceeded the Zacks Consensus
Estimate by 15 cents per share.
Revenues in the quarter fell 4.5% to $37.61 billion, which is lower
than the Zacks Consensus Estimate of $37.98 billion. Unit sales
rose 3% to 2.39 million vehicles from 2.32 million vehicles in the
second quarter of 2011. The automaker occupied a worldwide market
share of 11.6% during the quarter, down from 12.3% a year-ago.
The decline in profits and revenues was attributable to
strengthening of U.S. dollar against most of the major currencies
as well as weak macroeconomic conditions globally, especially in
Europe and South America.