May 17, 2012 / 9:56 AM / 6 years ago

GM chooses UK plant over Germany for new Astra

LONDON (Reuters) - General Motors Co (GM.N) will build the next generation of its Astra compact in Britain after workers at its factory in Ellesmere Port, northwest England, overwhelmingly agreed to a new labor deal, leaving its plant in Bochum, Germany in danger of closure.

The U.S. carmaker said on Thursday it would invest 125 million pounds ($199 million) in the Ellesmere Port plant, where assembly of the new vehicle will start in 2015.

Britain’s Unite union said 94 percent of those balloted voted in favor of changes to working conditions and that some 700 jobs would be created at the plant, securing its future until 2020.

“It’s almost certain that one of GM’s German plants will now be closed, probably the plant in Bochum,” a source close to the negotiations said.

GM, which sells under the Vauxhall brand in Britain, is expected to halt production of the Astra, its most important model, at its main plant in Russelsheim, Germany, making the car only at Ellesmere Port and at Poland’s Gliwice plant from 2015.

The source added that some production of GM’s Chevrolet marque could be shifted from Asia to Europe, with Russelsheim the likely beneficiary. This would leave the Opel factory at Bochum as the most likely site to be closed.

The decision is one of the most dramatic so far as Europe’s carmakers look to restructure or consolidate in response to more than four years of falling demand and profits.

Many factories are running at partial capacity - analysts estimate automakers have cut some 3 million cars, or 20 percent, from their production lines - and still producers struggle to sell their wares.

Opel made a loss of $750 million last year.

The UK deal means an extra third production shift will be added at the Vauxhall factory to ensure 24-hour a day running, as well as the introduction of weekend working to guarantee the factory works at full capacity.


The source added that production at the plant, whose sole product is the Astra, would initially rise from 140,000 cars a year to 160,000, with the potential to hit around 220,000.

Workers agreed a four-year pay deal including a pay freeze for two years, followed by rises of around 3 percent for the next two years, the source added.

“We have been able to develop a responsible labor agreement that secures the plant’s future,” Vauxhall Chairman Duncan Aldred said in a statement.

“This is assisted by the government‘s industrial strategy, increasing its focus on the manufacturing sector and creating ideal ground for companies to build up long-term investments.”

    There had been speculation earlier this year that the plant could miss out on investment by GM because it sources most of its parts from Europe and exports the majority of its cars there.

    The deal will provide a boost to the British government, which is grappling with a recession and weak opinion poll ratings.

    Securing increased production by foreign-owned carmakers based in Britain has been one of the few bright spots in a drive by politicians to boost manufacturing and rebalance the economy away from financial services.

    “Once again we have seen the success of the UK automotive industry and the crucial role it plays in growing and rebalancing our economy,” British Prime Minister David Cameron said in a statement.

    “This has been a real team effort with the Government, the company, unions and workers all focused on keeping production in the UK.”

    Japan’s Nissan (7701.T) and Toyota (7203.T) as well as Tata Motors’ (TAMO.NS) Jaguar Land Rover have committed their futures to production in Britain in recent months.

    Britain now exports more cars than it imports for the first time since 1976, official figures released on Wednesday showed.

    ($1 = 0.6282 British pounds)

    Additional reporting Estelle Shirbon in London and Christoph Steitz in Frankfurt.; Editing by Paul Hoskins and David Holmes

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