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    Sunday, May 05, 2024

    GM's factory closing in Germany may start a trend

    Paris - General Motors's move to shutter the first German car factory since World War II addresses only a fraction of the supply glut hobbling the European auto industry.

    "One would need to close at least one factory per volume manufacturer in Europe, which would be about five factories in total," said Philippe Houchois, a UBS analyst in London, referring to Renault, PSA Peugeot Citroen, Fiat and Ford as the other four companies needing to shut plants.

    Hamstrung by political pressure not to cut jobs, Europe's carmakers have balked at shutting unprofitable plants, closing just two in the past four years: a GM facility in Belgium and a Fiat factory in Sicily. With demand softening, overcapacity in western Europe may more than double to about 2 million vehicles in 2012, according to researcher IHS Automotive. The region's car market will contract 7 percent this year, the European Automobile Manufacturers' Association, or ACEA, said last week.

    GM's announcement Wednesday to shut a factory in Bochum, Germany, reflects the difficulties that European automakers face. The move will take until 2017 to carry out after the Detroit-based automaker agreed to extend job guarantees.

    "Even GM seems to need five years to close down its most marginal plant," said David Arnold, a sales specialist with Credit Suisse in London. The prolonged closure "highlights once again that there will be no easy or indeed quick solution to the European overcapacity problem."

    Car sales across the region tumbled 7.1 percent in the first four months of the year, with the Italian, French and Greek markets all plunging 18 percent or more, according to ACEA data. Delivery figures for May will be released Friday.

    Opel is in negotiations with unions to keep the Bochum plant open until GM stops making the Zafira minivan at the factory at the end of 2016, the Ruesselsheim, Germany-based GM unit said Wednesday. Opel would extend job protections by two years through 2016 and in exchange ask workers to delay wage increases set for this year.

    "Under the current economic conditions and outlook, there will be no further product allocation for Bochum after the Zafira goes out of production," Doris Klose, an Opel spokeswoman, said by telephone. "It is currently being negotiated with the unions whether something else might be produced there."

    The deepening crisis has some carmakers calling for intervention. French Industry Minister Arnaud Montebourg said his government is considering support for automakers after Renault Chief Operating Officer Carlos Tavares said he would welcome "any kind of measure of support."

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