GM Considering All Options to Reduce Losses at Troubled Opel Division

Europe’s sovereign debt crisis has taken its toll on new auto sales as consumers tighten their purse strings in anticipation of more austerity measures.

On Wednesday, the company’s CFO Dan Ammann said the company is considering all its options, including additional job cuts and plant closings at its Opel division, to offset third-quarter losses of $300 million in the European market.

Metzler Bank auto analyst Juergen Pieper said, “There is a danger that the losses will only get bigger,” and added, “The question mark over Opel’s future remains.” He predicts Opel will continue to lose money into 2013.

Opel’s deputy chairman and union official Klaus Franz said he was “astonished” by the announcement that GM was considering additional plant closures. He said GM’s current agreement with labor prohibits the automaker from making further labor cuts through 2014. In a statement, Franz said, “GM’s board of directors has agreed to these contracts and they are legally binding for GM. Repeated speculation on the future of Opel/Vauxhall is irresponsible and damages business.”

Last Thursday Franz issued another statement in which he claimed, “The restructuring of Opel in Europe has been successfully concluded. The contracts with a duration until at least end of 2014 rule out plant closures and job cuts. These contracts were approved by GM’s board of directors and are legally binding.”

Opel has cut 8,000 jobs since early 2000 but many industry analysts predict that additional cuts will be necessary if the brand is to survive.

In addition to increasing competition from Asian automakers, Opel has also felt the impact of the severe economic downturn that has affected its primary market; the euro zone.

Credit Suisse analyst Reto Hess says, “Opel has shown that they are not yet on the right path.” He predicts, “There will be a problem as long as the industry doesn’t adjust capacity.  Europe is not really a growth market, partly because of the long-term demographics, and in the short-term the macroeconomic situation is not looking so good.”

Opel is not the only European automaker being affected by market pressures. In October, French automaker PSA/Peugeot-Citroen announced that it had cut 6,000 jobs and warned that its core automotive business would probably only break even this year.

During the first nine months of this year, new vehicle registrations fell 0.8 percent according to the European Automobile Manufacturers’ Association.

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