General Motors Company‘s (GM) ill-fated European arm Opel has decided to cut work hours of thousands of workers at two of its four plants in response to a sluggish demand for cars in the troubled Europe. The company will reduce work hours at its main facility in Ruesselsheim and its component plant in Kaiserslautern for 20 days between September and the end of the year.
The move will affect half of 13,800 workers in Ruesselsheim, especially those in production lines and administration. On the other hand, it will affect 2,500 workers at the company’s Kaiserslautern factory
Opel lost $747 million last year due to weak car sales, high fixed costs and excess production capacity. This resulted in a total loss of more than $12 billion in 12 years.
In the first half of 2012, Opel’s loss amounted to EUR938 ($1,200) per vehicle sold, according to the CAR Center of Automotive Research at the University of Duisburg-Essen. Its deliveries in Europe dipped 15% to 457,630 vehicles due to weak demand emanating from the debt-crisis in Europe and strong competition from Asian automakers.
In December last year, Opel had revealed that it expects to report an operating loss of EUR1 billion ($1.3 billion) in 2012 due to fewer car sales than anticipated. The unit expects to sell 1.4 million vehicles in 2012, which are about 100,000 units less than the earlier projected sales.
In order to reverse the 12 years of losses in Europe, particularly from the Opel brand, GM formed a global alliance with PSA Peugeot Citroen (PEUGY). The pact will help both the automakers reduce at least $2 billion in costs.
The present Euro zone financial crisis has affected the operations of many global automakers, especially GM and Ford Motor Co. (F). Both the automakers have a significant exposure to the market.
Ford expects to lose more than EUR1 billion in Europe. It has already cut back production at its Cologne-based plant in Europe in May and June that affected 4,000 workers.
GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in profits to $1.49 billion or 90 cents per share in the second quarter of the year from $2.52 billion or $1.54 in the same quarter of 2011. Nevertheless, profits exceeded the Zacks Consensus Estimate by 15 cents per share.
Revenues in the quarter fell 4.5% to $37.61 billion, which is lower than the Zacks Consensus Estimate of $37.98 billion. Unit sales rose 3% to 2.39 million vehicles from 2.32 million vehicles in the second quarter of 2011. The automaker occupied a worldwide market share of 11.6% during the quarter, down from 12.3% a year-ago.
The decline in profits and revenues was attributable to strengthening of U.S. dollar against most of the major currencies as well as weak macroeconomic conditions globally, especially in Europe and South America.
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