GM's Opel to Trim Hours of German Workers
August 19 2016 - 4:10PM
Dow Jones News
FRANKFURT—General Motors Co.'s Opel unit is paring back the
hours of German factory workers in a move aimed at blunting the
impact of Brexit and breaking even in Europe for the first time in
nearly two decades.
GM is scaling back work at two Opel assembly plants in Germany
that make models popular in the U.K. Auto makers have said the
U.K.'s decision to leave the European Union could result in
currency headwinds and weaker British demand for light vehicles,
potentially slowing momentum in Europe's healthy auto market
The Detroit auto maker's European unit had been on track to end
a long streak of financial losses in the region before the Brexit
vote. Last month, however, GM executives have said softer vehicle
sales and the negative effect of a weaker British pound could
result in a $400 million hit in the second half of the year,
endangering the break-even goal.
GM Chief Financial Officer Chuck Stevens told analysts last
month that all options are on the table to soften Brexit's blow,
including cutting manufacturing and material costs, or potential
price increases.
A spokesman confirmed Opel's reduction Friday but wouldn't say
how many employees are affected and how long the action is expected
to last. Workers will be put on short-time work, a German system
used across sectors in which workers' hours are cut for a limited
period to prevent job losses.
Commerzbank analyst Sascha Gommel said short time is a useful
tool for German employers, which are prevented by national labor
laws from laying off workers to adjust for declining demand.
Germany's Volkswagen AG is also currently using short-time work due
to a supplier dispute that has disrupted some production.
Sales at Opel—GM's main brand in Europe—have rebounded as a
result of a turnaround effort led by the division's chief
executive, Karl-Thomas Neumann. Appointed in early 2013, the former
Volkswagen executive launched a marketing blitz to revitalize
Opel's faded image and introduced a string of fresh vehicles,
including an Astra small car that received Europe's Car of the Year
award in February.
GM last month reported a second-quarter operating profit of $137
million in Europe, its first quarter in the black since 2011.
Ford Motor Co. reversed losses in Europe recently amid stronger
sales in the wider market, but is forecasting a negative financial
impact related to Brexit of about $200 million this year and $400
million to $500 million in each of the next two years.
GM considered selling its loss-making Opel unit amid its 2009
bankruptcy restructuring but pulled the plug on that idea in favor
of restructuring. GM Europe has racked up more than $15 billion in
losses since 1999. It pulled the Chevrolet brand out of Europe in
late 2013, signaling its confidence in Opel's future.
The U.K. is the biggest market for two of Opel's most popular
vehicles—the Corsa small car, built in Eisenbach, Germany, and the
Insignia midsize car, assembled at a plant in Opel's headquarters
in Russelsheim, Germany. They are sold under Opel's sister brand in
the U.K., Vauxhall.
Write to Natascha Divac at natascha.divac@wsj.com
(END) Dow Jones Newswires
August 19, 2016 15:55 ET (19:55 GMT)
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