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GM to Meet Unions Today to Outsource 5,000 Jobs in Europe

28 Feb 08

Although GM has made no formal announcement, the company is said to be meeting with worker representatives today to discuss ways of reducing its European headcount by 5,000.

Global Insight Perspective
Significance	Rumours have been circulating for several weeks now that GM Europe plans to make some fresh job cuts in addition to outsourcing several thousand jobs to its suppliers in order to gain new productivity savings.
Implications	GM has cut its European workforce by 12,000 since 2004, with most of those reductions coming from its Opel unit in Germany. Now, the company is said to be looking at cutting its Spanish and U.K. workforces, and it is almost certain that some kind of restructuring will take place in Germany.
Outlook	GM's management has always stressed that restructuring efforts in a global conglomerate like theirs which operates in fast-changing markets the world over can never really be over, which make this latest round of cuts unsurprising. On the other hand, GM is now performing better than it has done for a long time in the cut-throat European market, however, which should suggest that further wide-scale job losses in the region are unlikely in the short-term.

Executives from General Motors (GM) will meet with trade union leaders today to discuss its plans to outsource around 5,000 jobs in Europe, according to Automotive News Europe. The report quotes a memo sent by GM's vice president of manufacturing Eric Stevens, which allegedly stated that GM wanted to eliminate 5,136 jobs in Europe this year in order to achieve new productivity savings.

Automotive News Europe says that the company's Ellesmere Port factory in the north-west of England, which produces Astra cars for GM's U.K. brand Vauxhall will shed 460 jobs, as reported earlier this week (see Europe: 25 February 2008: Opel and Vauxhall Workers Fear New GM Europe Job Cuts) while another 200 jobs will allegedly be outsourced from GM UK's commercial vehicle (CV) factory in Luton, in the south of England.

The trade publication does not know where the other outsourcing or job cuts will take place, but it points to the outsourcing of more than 950 jobs from GM's German unit Opel to external suppliers, as reported by Global Insight earlier this week. Under this plan, workers would continue to work at the same Opel sites, according to German media reports. It is also believed that 900 job cuts will be made in Spain via a combination of voluntary redundancies and early retirements (see Spain: 20 February 2008: GM to Cut 900 Jobs at Zaragoza, Spain Factory).

A GM spokesperson told Automotive News Europe that: "There is no new European restructuring program, but of course we continually review the competitiveness of our plants."

Outlook and Implications

After several years of painful restructuring which involved the shedding of more than 12,000 jobs in Europe, GM Europe's fortunes looked like they were on the way back up. However, heavy losses emanating mostly from North America have caused the struggling U.S. carmaker to embark on a fresh round of global cost-cutting measures.

GM lost a staggering US$38.7 billion for the full year 2007 which was the biggest annual loss in automotive industry history. This must be looked at in its full context: GM booked a US$38 billion loss in the third quarter of 2007 to write down deferred tax credits that will not be taken due to its financial straits. It was a book loss only, and not indicative of GM's true automotive operations situation (see World: 13 February 2008: GM Posts Record One-Time Loss as International Sales Bolster North American Losses). In Europe, GME was profitable, managing a US$55 million pre-tax income for the full-year 2007, which was, however, significantly lower than 2006's US$357 million profit.

GM's management has always been clear on the fact that with a massive global enterprise like General Motors and with the ever-changing nature of the markets, restructuring efforts never really stop—they have to be ongoing. Although the company now has several plus points in Europe, including its immense success in the burgeoning Russian market and the explosion in sales of its budget brand Chevrolet, there are several negatives offsetting these positives, not least the weakness in its most important European market of Germany, where total market volumes shrank last year to their lowest volumes since the Germany was unified in 1989 (see Europe: 10 January 2008: Thriving Russian Market Takes GM Europe's 2007 Sales to Highest Ever Levels). For these reasons, it should come as little surprise that GM is trying to further reduce its European headcount, and although one could assume that this will not be the last round of restructuring it undertakes in Europe this decade, at least these measures may be contained largely to the outsourcing of workers as opposed to the wide-scale job cuts that GM has embarked on in the past.

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