Following General Motors’ announcement of a major restructuring scheme throughout its ailing European division, its Adam Opel subsidiary has confirmed that 4,500 employees have accepted a severance offer put forward by the company. The cutbacks mark the start of a major recovery programme for GM Europe, but the auto giant must realize there is no quick fix.

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Despite early doubts, some 4,500 employees at Adam Opel have accepted a severance offer put forward by the company, helping to prevent large scale compulsory redundancies. The layoffs are a part of General Motors’ European restructuring programme, which will ultimately result in 9,000 job losses at its German subsidiary. The company is also planning cuts at its Saab and Vauxhall units.


GM’s European operations have long been facing problems, making a loss of $US742 million in Europe alone during the course of 2004. A brief comparison with other automobile manufacturers’ western European sales demonstrates the problem – while Toyota and BMW experienced sales growth of 7.1% and 12% respectively, GM only managed a 0.6% increase.


Given that the European market, which is beset with overcapacity, growing competition and falling prices, is predicted to remain fairly stagnant during 2005, such cuts are a necessity for the GM’s future. Indeed, it would be virtually impossible for the firm to grow its way out of the red without some form of austerity drive. It is thought that the measures will help to generate savings of $659 million.


GM should consider its cost cutting programme as only one element of its restructuring. At the heart of the company’s problems is the fact the consumers have been opting for models from manufacturers such as Renault and Toyota which are often viewed both as more reliable and ‘trendier’.

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However, if the company’s recent history is anything to go by, it would appear that GM is up to the task. In the US it is definitely turning the corner, especially with regard to the Cadillac division, which now has a waiting list for some of its luxury models. There is little doubt that GM Europe will be turned around and we can expect to see a much leaner and more efficient organisation in a few years’ time. However, the company’s size and the scale of the task dictate that an overnight transformation is out of the question.


SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.