The European auto industry is facing "a storm the potential size of a tornado," warns Fiat/Chrysler CEO Sergio Marchionne.
New car registrations in the European Union fell by 8.2% in 2012, dropping to their lowest level since 1995, according to figures from the European Automobile Manufacturers Association.
And with the European Union still struggling to resolve its debt crisis and pull out of recession, industry analysts fear the situation may likely get worse this year – a situation that could prove disastrous for some of the Continent’s weaker manufacturers who have already racked up billions of dollars in losses.
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The European auto industry is facing “a storm the potential size of a tornado,” Fiat/Chrysler CEO Sergio Marchionne is warning. “This can’t go on forever” without doing serious damage to the industry.
Carmakers across the 27 EU countries registered 12.05 million new vehicles last year. Of the major markets, the United Kingdom was the only one to grow as sales climbed from 2011.
Opel may love autos but it isn't getting much love from parent GM.
General Motors Corp.’s year-end financial report is expected to show some very good numbers. The exception is Europe where the company’s chronic problems with its German-based Opel subsidiary remain unresolved and losses could exceed $1 billion — just as they did in 2010.
GM chairman Dan Ackerson flatly stated last summer Opel is not for sale. He also dispatched GM vice chairman Steve Girsky, perhaps his most trusted lieutenant, to Germany to fix Opel. And the one-time auto analyst has been busy shaking things up.
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Girsky’s latest move has been to completely shake up Opel’s supervisory board which, under Germany unique corporate governance system, is responsible for hiring and firing the executives on Opel’s board of management.
With Astra production to move elsewhere, troubled Opel is closing its plant in Antwerp.
At least 8,300 jobs will be cut and an assembly plant in Antwerp, Belgium closed, as part of a broad restructuring by General Motors’ troubled Opel subsidiary.
It had previously been reported that the company was considering the shutdown of two plants and at least 10,000 job cuts, so further moves could be in store as the German-based Opel takes aim at an underutilized manufacturing base and a bloated cost structure.
“Opel has to reduce its production capacity by 20%,” said Nick Reilly, Opel’s new CEO. The job cuts and closure, he added, reflect “the tough reality of the current economic environment.”
While some parts of Europe have been showing financial momentum, in recent months, much of the Continent’s southern tier, countries including Spain, Italy and Greece, are economic basket cases, and that’s translating into a perilously weak automotive market.
Reilly estimated 2010 European car sales would decline 1.5 million units compared to 2009 and would tally 4 million fewer than 2007.
But even without these problems, Opel has been struggling for a number of years and wouldn’t have survived without a bridge loan from the German government, last year. In turn, Berlin pressed GM to sell a majority stake in the subsidiary before it would offer additional aid. A deal with the Canadian mega-supplier Magna International fell through, late in 2009, when the new GM board decided Opel was too valuable an asset to relinquish. The U.S. maker is now seeking alternative aid from European governments and pushing through a massive restructuring.
The need to trim production has been a given, for Opel, for more than a year, and the Antwerp facility was given little chance of survival considering it had been scheduled to lose production of the Astra, one of Opel’s mainstays. The Belgian government had offered more than $700 million in aid to GM, hoping to stave off closure, but the bid was rejected.
Despite some recent successes, with products like the new Insignia, Opel will cut capacity by up to 25%.
While it is “still finalizing” details of a turnaround plan for its troubled European subsidiary, Opel, General Motors expects to reduce its capacity by as much as 25%, a senior official revealed today, which would likely lead to a massive cut in jobs.
Earlier this month, GM reversed plans to sell a majority stake in Opel, which not only provides product for much of the company’s overseas dealers, but also serves as a major global product development center for brands like Chevrolet.
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The unexpected move has kicked off worker protests and rage among German politicians, who had brokered a proposed deal between GM and the Canadian auto supplier Magna International. It has also generated concerns that Opel would be targeted for big cuts in an effort to staunch multi-billion-dollar losses.
That is an eventuality that Nick Reilly, Adam Opel GmbH’s acting CEO, confirmed in a corporate blog entry, today. “What is clear is this: Opel/Vauxhall must reduce its capacity across Europe by somewhere between 20 and 25 percent,” said Reilly, who also serves as head of GM’s international operations.
The pronouncement was no surprise, nor was Reilly’s comment that, “We are still finalizing the details on the plan.” He and other GM officials are set to meet with representatives of Opel’s European unions, next week, and it is likely the automaker will press to get back the concessions workers withdrew after the sale to Magna collapsed.
Meanwhile, the company will face off with government officials representing the five European countries where Opel has plants. Enraged politicians, in Berlin, not only withdrew an offer to aid the new owners, had the sale gone through, but demanded GM immediately pay back a $3.7 billion bridge loan that had kept Opel out of bankruptcy.
Whether the Germans will now weigh back in is unclear, but representatives from Britain and several other countries have expressed interest in offering their own incentives, which could impact where the future cuts in employment occur. It has been widely expected that at least 10,000 Opel jobs – equal to 20% of the workforce – will be eliminated. Under the Magna deal, a disproportionate share of cuts would have taken place outside Germany, even though that country’s factories were considered among Opel’s least efficient.