GM Spokesman Retracts European Plant Closure Comment

GM posts $400 million loss in Europe in second quarter CEO says progress made on key components of restructuring plant Restructuring will affect more than blue-collar workers

UPDATE: A spokesman for General Motors said Thursday he made a mistake in telling AFP that the U.S. automaker was in talks to close one or more factories in Europe. Company spokesman Jim Cain said he did not "intend to suggest that we might consider closing one or more plants." "What I was trying to convey was that we are negotiating the issue of capacity with IG Metall," he added in an e-mail. "Those discussions include the future Bochum facility after the current product cycle." He added that GM has "reiterated that it was honoring its contracts in place."

Original Report: General Motors (IW 500/4) is in talks to close one or more factories in Europe and hopes to reach a "comprehensive" deal with German unions in the coming months, the U.S. automaker said Thursday.

"Opel management and German unions are continuing to discuss a broad range of issues that will help ensure the sustainability of the business, including productivity, cost and capacity," GM Chief Executive Dan Akerson said.

"We expect to have a comprehensive agreement in place sometime this fall."

When asked whether current talks could lead to one or more plant closures, GM spokesman James Cain said "yes, it is still in negotiation."

Too Much Capacity

"Capacity has to be addressed and that is a major focus of the negotiations," he told AFP.

GM, which posted Thursday a $400 million loss in Europe in the second quarter following a $256 million loss in the prior quarter, has spoken for some time about the need to reduce excess capacity at its European subsidiary Opel-Vauxhall.

"In the past, we haven't moved fast enough to fix the things that we can control, but that has changed," Akerson said in a conference call discussing the automaker's second-quarter results.

In late June, Opel's supervisory board approved a plan that involved deep restructuring, huge investment in the product range of the Opel and Vauxhall brands, and a new marketing strategy.

Akerson said the company has made progress on the key components of the European restructuring plan -- "building a stronger team, investing in new products and addressing our cost and capacity."

GM has also reached "competitive operating agreements" with unions in England and Poland and "made good progress streamlining decision-making, reducing our material cost and managing our working capital and cash flow," Akerson noted.

Not Just a GM Issue

Other automakers also need to address European overcapacity in order to return the industry to profitability and eliminate steep discounts being offered to help shift excess vehicles, Chief Financial Officer Dan Ammann said.

"If you look across the industry, third parties have speculated there's somewhere between five and seven or eight assembly plants that would need to come out of the industry in the long term if it were to stay at these types of levels," he said in a conference call.

"Across the industry in Europe we're starting to see some of the required actions begin to occur which we haven't seen until now."

France's PSA Peugeot (IW 1000/43) announced plans last month to eliminate 8,000 jobs and close its historic Aulnay plant north of Paris.

Fiat has temporarily suspended production at one of its Italian plants and recently warned that it may close a different factory permanently if sales did not improve.

GM's restructuring will not only affect blue-collar workers.

"In recent weeks, you have seen that we would not hesitate to act when change is required to make the business stronger," Akerson said.

That includes removing senior executives who "are not delivering expected results or alternatively who do not meet the highest standards for accountability and integrity," he added.

On Sunday, GM announced the immediate departure of the head of its U.S. marketing, just weeks after the exit of its U.S. design chief.

Opel chief Karl-Friedrich Stracke quit abruptly last month after just 15 months in the job. His interim replacement is Opel's fourth new chief within a period of just three years.

Copyright Agence France-Presse, 2012

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