Bad news for Opel! Employees at the luxury car making unit
General Motors Company
) have rejected its turnaround deal to save the struggling
European unit. The failure of the deal means that the plant will
be closed down by 2014 instead of 2016, significantly adding to
the surging unemployment in Europe as the Bochum factory employs
more than 3,000 workers.
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Opel had initially intended to keep the plant in operation till
2016 and retain 1,200 of the more than 3,000 employees in other
component and warehousing jobs. The company wanted workers at the
plant to accept delay in wage increases. But about 76% of
employees at the plant voted against the deal.
The Bochum 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.
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
General Motors by 2014.
Late 2012, Opel had 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 had already 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 an excess
production capacity. These resulted in a total loss of more than
$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 export sales.
In 2012, GM's revenues from European operation declined 11.1% to
$5.6 billion. The operation also reported a higher adjusted loss
of $0.7 billion in the quarter, compared with $0.6 billion a year
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.
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 higher profits of $0.8
billion or 48 cents per share in the fourth quarter of 2012,
compared with $0.7 billion or 39 cents in the same quarter of
2011. However, earnings missed the Zacks Consensus Estimate by a
penny. The results excluded net gain from special items of $0.1
billion or 6 cents in the 2012-quarter and net loss from special
items of $0.2 billion, or 11 cents in the 2011-quarter.
Revenues in the quarter scaled up 3.4% to $39.3 billion, which
was higher than the Zacks Consensus Estimate of $38.6 billion.
Unit sales escalated 4.2% to 2.3 million vehicles. The automaker
occupied a market share of 11.5% during the quarter, down from
11.6% in the year-ago quarter.
GM expects to boost its top-line in 2013 with the help of new
vehicle launches. At the same time, the company believes cost
control measures will boost its bottom line growth. It expects
2013 capital expenditures to be at the 2012-level.