General Motors Europe today (12/12/00) announced a major restructuring plan to improve its market position and return its business to profitability.

The company says that this year's downturn of the Western European vehicle market and GM's market share performance in many of the individual countries, combined with shifting consumers' preference to smaller vehicles, and intensified downward pressure on vehicle prices, led to a third quarter loss of $US181 million. With industry conditions continuing to deteriorate, a much larger loss is expected for the fourth quarter.

This restructuring plan, combined with continued investment in an aggressive future product program has the objective of generating savings sufficient to return GM Europe to profitability.

In the manufacturing area, Vauxhall is taking the brunt of GM's offensive with 'a major restructuring of its operations' culminating in the axing of the Luton Vectra plant.

GM proposes to reduce Vectra production to one shift early in 2001, and cease altogether at the end of the life of the current Vectra model, which will be by the end of the first quarter of 2002.

Remaining Luton facilities would concentrate on commercial and offroad vehicles, while passenger car (Astra) production would be concentrated at Ellesmere Port. This means that the new medium-duty van, the Vivaro, developed with Renault and the Isuzu-derived Frontera would be produced at Luton.

Ellesmere Port will continue to produce the Astra and a study is being made to possibly incorporate the next-generation Vectra and turn the facility into a two-model flex plant.

GM says that these 'specific actions in the UK', and those previously announced, including the "leanfield" conversion of Opel's Rüsselsheim manufacturing site, will reduce its European installed capacity by more than 400,000 units between now and 2004.

Ominously, its also says that, going forward, capacity utilisation across GM's European operations will continue to be evaluated. In addition, lean manufacturing implementation will be accelerated across all European plants, to obtain the productivity levels currently demonstrated at Opel's benchmark Eisenach facility in the former east Germany.

In the sales, marketing and administration areas, GM Europe intends to drive efficiency measures and to achieve significant savings at the national sales offices in the various European countries and regions. The migration of certain financial and administrative functions to the company's European Financial Shared Services Centre in Spain announced in May of this year will be accelerated, so that projected savings will be achieved earlier.

Taken together, these various restructuring activities, as well as a number of other actions, are expected to reduce overall employment levels in Europe by more than 5,000 people within the next 18 months, consistent with the objective of reducing the salaried headcount by 10% by the end of 2001.

Another portion of the planned savings will come from further material cost reductions, driven in part by synergies derived from GM's recent alliance with Fiat. In addition, improvements in current product material cost will be accelerated by the establishment of a dedicated joint purchasing/engineering project team that will work with GM Europe's supplier communities.

With regard to product development, it is planned to maintain investment levels that have increased in the past few years to support an aggressive future product line-up for GM Europe's brands.

Opel/Vauxhall are currently re-evaluating their future vehicle portfolio, to focus on delivering more innovative products. As an initial consequence, Opel has scrapped plans for the introduction of an Omega V8 version. Saab, over the next five years, will considerably enlarge its product range in line with its growth strategy for Europe and the US.