General Motors (GM) will build the next-generation Astra compact car at plants in Britain, Germany, Poland and Sweden, but no longer in Belgium, the world's biggest carmaker said on April 17.
The Astra is GM's top model in Europe with nearly half a million sold last year so GM plants across the region were keen to get the assembly work and some 3.1 billion euros ($4.2 billion) of investment.
GM Europe President Carl-Peter Forster made the announcement in Brussels after negotiations with labour representatives in a hotel at Brussels Airport.
The company said the Antwerp plant in Belgium would also lose the equivalent of an entire production shift this year, corresponding to about 1,400 jobs or a third of the workforce, but GM will continue to assemble vehicles there.
Negotiations with GM's labour representatives will decide ultimately how expensive the restructuring will be.
"It is very important to state that we are not talking about a plant closure in Antwerp," Forster told reporters, adding GM would consider producing a different model there, such as a small Chevrolet brand car.
GM makes the current Astra in Antwerp, Bochum in Germany and at Ellesmere Port in north-west England.
"Ultimately, cost per unit, total cost position and productivity were not so dissimilar between those three large western European plants that this itself would drive the decision towards one or the other plant," Forster said.
Instead, strategic considerations led to Ellesmere Port and Bochum retaining production, he explained, since GM Europe's two largest markets remain Britain and Germany, which respectively are also home to the Vauxhall and Opel brands.
"In terms of natural hedging it's important to produce in the UK because we have a large exposure to the British pound," Forster added in a conference call with reporters.
GM Europe's Gliwice plant in Poland and the Trollhattan factory in Sweden also won work on the new Astra, due in 2010.
By then the company hopes to have improved productivity by 30 percent. Its output of compact cars in Europe will rise to 750,000, some 40 percent above the number it made last year.
"We are under considerable pressure particularly from Far Eastern manufacturers. They do not only enjoy lower labour costs but also massively undervalued currencies," Forster said, pointing for example to the yen being undervalued to the euro.
"We can only counteract with further productivity improvement. It's always difficult to anticipate how this will or will not have to be turned into headcount reduction, it very much depends on the volume," he warned.
Should the total western European car market grow then productivity improvements do not necessarily have to lead to headcount reductions, Forster said.
GM Europe, which last year made its first annual profit since 1999 thanks to sweeping cost cuts and rising unit sales, employed 60,500 workers at the end of 2006.
GM's European workforce has already offered to cut costs by about 290 million euros to improve competitiveness in the hope of preventing the closure of a another European plant, labour representatives said this month. Europe's largest carmaker eventually offered the plant the prospect of building the new Audi A1, securing 2,200 jobs, but only after workers had accepted longer hours for the same pay.
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