* To cut hours at Ruesselsheim, Kaiserslautern plants
* Halts production for 20 days this year from September
* Works council, IG Metall union agreed to plan
* Cutting hours will not solve overcapacity -analyst
By Andreas Cremer and Maria Sheahan
FRANKFURT, Aug 23 General Motors Co's
ailing German unit, Opel, will cut the hours of several thousand
workers at two of its four plants in response to a drop in
demand for cars in Europe.
Opel agreed with labour representatives to halt production
for a total of 20 days at its main factory in Ruesselsheim and
its component plant in Kaiserslautern between September and the
end of the year, it said on Thursday, confirming an earlier
GM lost $747 million on its European operations, which
include Vauxhall in Britain, last year as a weak economy hit car
sales in the region, forcing automakers to confront high fixed
costs tied to running about 10 more car plants than needed in
Europe, where demand for new vehicles is sliding.
"The European automobile market is declining dramatically,"
Opel's head of personnel, Holger Kimmes, said in a statement,
adding that flexible working hours were no longer sufficient to
offset a decline in use of the Ruesselsheim factory.
The move could save GM about $50 million if half the workers
at the two plants take the downtime, Barclays Capital analyst
Brian Johnson said in a research note.
"While not a game changer, the savings gives us additional
confidence that we will not need to adjust second half
estimates," Johnson wrote, adding that GM could benefit more if
it extends the program into 2013.
"Nevertheless, the program is only a stopgap measure, and
does not remove the need to take out 1-2 plants quickly, as
opposed to the 2016 timetable for one plant (Bochum)," he said.
The GM division is squeezed between sagging consumer demand
in Europe's indebted economies and growing competition from
Asian volume-car makers. Opel lost an average 938 euros ($1,200)
before interest and tax per vehicle sold in the first half of
the year, a survey of the CAR Center of Automotive Research at
the University of Duisburg-Essen showed.
Opel's first-half European deliveries plunged 15 percent to
Yet shortening staff hours may grant only a short-term
reprieve to Opel, doing nothing to alleviate the carmaker's
structural problems of unused factory space, said
Frankfurt-based Commerzbank analyst Sascha Gommel.
"Closing down plants for a few days isn't going to help Opel
with its most pressing problem of overcapacity," Gommel said.
It has 13,800 workers in Ruesselsheim, about half of whom
will be affected by the agreement, the company said. It is
cutting hours of employees on the production lines as well as in
The Kaiserslautern factory has a workforce of 2,500.
Now that it has the approval of the works council and labour
union IG Metall for the plan, Opel can apply for subsidies under
the German government's short-work programme, called
The scheme was used by many struggling companies in the
2008-2009 recession, allowing them to preserve jobs by cutting
employees' hours when plant usage was low and having the
government compensate workers for part of their lost wages.
U.S. carmaker Ford Motor Co, which expects to lose
more than 1 billion euros ($1.23 billion) in European operations
this year, cut back production at its Cologne-based main
European factory in May and June, affecting 4,000 workers.