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Last Updated: Thursday, 14 October, 2004, 14:36 GMT 15:36 UK
GM to cut 12,000 jobs in Europe
Vauxhall VX220 car
General Motors is suffering from weaker sales
US car giant General Motors (GM) has said it is to shed 12,000 jobs in Europe as part of a cost-cutting drive.

GM's German operations - which include car firm Opel - are expected to bear the brunt of the losses.

The job cuts, 90% of which will take effect next year, are part of an austerity programme designed to cut costs by 500m euros ($600m; 340m).

The lay-offs account for nearly one fifth of the company's 63,000-strong European workforce.

Profits under pressure

GM hopes the job cuts will help turn around its loss-making European division, which also includes Swedish car firm Saab and Vauxhall in the UK.

We have no other choice than to take tough steps to ensure our long-term success
Fritz Henderson, chairman, GM Europe

Detroit-based GM on Thursday said group profits rose to $440m in the three months to September, up slightly from $425m during the same period last year.

But the company cut its profits target for the full year, partly because of rising losses in Europe.

GM Europe, which has not made a profit for four years, lost $161m in the first half of 2004, up from $68m one year earlier, according to the latest figures.

GM said in a statement that its European restructuring plan "provides for the majority of the cuts to be in Germany, with a heavy emphasis on managing and engineering".

But it is not yet clear precisely which of the firm's 11 European manufacturing sites will be affected.

German jobs threat

A spokesman for GM Europe said the company was still discussing the details of the plan with staff representatives, and that an agreement was expected by the end of November.

GM Europe
Brands: Saab, Vauxhall, Opel
Sales: 1.8m vehicles (2003)
Employees: 63,000
Factories: 11 (Germany, Sweden, UK)
Finances: $161m loss H1 2004
The firm's European factories include Opel plants at Ruesselsheim and Bochum in Germany, and Saab's main production site at Trollhaettan in Sweden.

GM also runs the Vauxhall plant at Ellesmere Port in the UK, where about 5,000 people work.

German trade union officials said the company was planning to eliminate 8,000 jobs in Germany, spread evenly between Opel's Ruesselsheim and Bochum factories.

That would reduce Opel's total workforce by about a quarter.

GM would not confirm the figures.

Separately, Saab said it expected to cut more than 500 jobs.

GM's German employees said the news had come as a blow.

"I've worked at Opel for 15 years already, and overnight everything can be over," said mechanic Steffen Nier.

"The marketplace for jobs is very bad. Four and a half million people are unemployed."

Factory closures 'possible'

GM Europe chairman Fritz Henderson said that while the restructuring plan could be achieved without shutting down factories, plant closures could not be ruled out.

The world as a whole has about 30% more (car) factories than it needs
Graham Maxton, Autopolis
"With losses since 1999 and no reasonable indication that market or economic conditions will improve substantially in the coming years, we have no other choice than to take tough steps to ensure our long-term success," he said in a statement.

European mass-market car makers are struggling in the face of intense price competition brought on partly by overcapacity in the industry.

"The world as a whole has about 30% more factories than it needs. That's about 170 factories around the world, and most of these, quite frankly, are surplus to requirements," said Graham Maxton, of Austrian-based automotive consultants Autopolis.

Volkswagen, Europe's biggest car firm, is currently in talks with unions over a plan to cut its German labour costs by 30% over the next seven years.

Why unions say they will put up a fight

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