GM Closing German Factory Seen Emboldening Others: Cars
By Mathieu Rosemain, Alex Webb and Tommaso Ebhardt - Jun 14, 2012 3:24 AM CT

General Motors Co. (GM)’s move to shutter the first German car factory since World War II addresses only a fraction of the supply glut hobbling the European auto industry.

“One would need to close at least one factory per volume manufacturer in Europe, which would be about five factories in total,” said Philippe Houchois, a UBS analyst in London, referring to Renault SA (RNO), PSA Peugeot Citroen (UG), Fiat SpA (F) and Ford Motor Co. (F) as the other four companies needing to shut plants.
Enlarge image GM Closing Factory in Germany Seen Emboldening Others

A car transporter loaded with Opel automobiles leaves the General Motor Co.'s Opel plant in Bochum, Germany. Photographer: Hannelore Foerster/Bloomberg
Enlarge image GM Closing Factory in Germany Seen Emboldening Others

A tram moves past the General Motor Co.'s Opel plant in Bochum, Germany. Photographer: Hannelore Foerster/Bloomberg

Hamstrung by political pressure not to cut jobs, Europe’s carmakers have balked at shutting unprofitable plants, closing just two in the past four years: a GM facility in Belgium and a Fiat factory in Sicily. With demand softening, overcapacity in western Europe may more than double to about 2 million vehicles in 2012, according to researcher IHS Automotive. The region’s car market will contract 7 percent this year, the European Automobile Manufacturers’ Association, or ACEA, said last week.

GM’s announcement yesterday to shut a factory in Bochum, Germany, reflects the difficulties that European automakers face. The move will take until 2017 to carry out after the Detroit-based automaker agreed to extend job guarantees.

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