Opel and BMW Halt Production, Ford Lays Off Workers

While there is no response to the needs of car manufacturers in Europe, in the USA, President Bush has approved a law granting General Motors, Chrysler, and Ford $25 billion in non-repayable aid.

Written by: Goran Vuzem

The New York Times has reported that General Motors and Chrysler are discussing potential collaboration. Official comments from both companies are extremely reserved, and they say nothing about this information, remaining within the standard framework of ‘seeking new business opportunities in the current, very difficult situation.’ Who could profit from a possible merger of two companies that are themselves in significant trouble (the value of General Motors’ stock has fallen from $43 last year to $5 last week) is uncertain. The only certainty is that the negotiations between these two companies are a clear sign that the situation for the automotive industry is indeed dire. However, as the entire world is burdened by a banking crisis and a decline in securities on all exchanges, the crisis in the automotive industry, which is a direct consequence of the overall chaos, has gone mostly unnoticed.

Until last week, when (paradoxically, right after the glamorous car show in Paris) information about layoffs and reductions in production capacities began to arrive from all sides. The first such information was announced by Opel and BMW. The latter informed the public that production at its factory in Eisenach would stop for three weeks, starting Monday. – ‘We are feeling the effects of the financial crisis. People are afraid, they have no money, and they are not ordering new cars,’ said Opel spokesperson Andreas Kroemer. In addition to halting production at the aforementioned factory and the factory in Zaragoza (where, among other vehicles, the Corsa is produced), Opel, through its spokesperson, announced that it would reduce the capacities of its factories in Luton and Elsmere (UK), Gliwice (Poland), and Antwerp, where the night shift will be eliminated.

Layoffs in Sweden

The Bavarian car manufacturer BMW announced that it would redirect 20,000 of its cars intended for the US market to China and Russia. However, this means that it will reduce production by 20,000 cars by the end of the year. The same goes for Daimler, which has decided to send workers at the Mercedes factory in Sindelfingen on vacation from December 17, rather than December 23 (as is customary), without explaining this decision for any reasons. Announcing this decision, the company’s spokesperson did not specify when production would resume in January. Interestingly, Porsche does not intend to reduce production capacities and recently distributed €6,000 bonuses to all employees due to record results last year. Besides Rolls-Royce, Porsche is the only European car manufacturer that does not feel the crisis, and not only is production not being reduced, but the number of employees is also not decreasing.

Thus, Ford Europe has decided to lay off 204 part-time workers. However, this is nothing compared to the layoff of 3,300 workers and the termination of contracts with 600 outsourced consultants at Volvo. Of that number, as many as 2,700 layoffs will occur in Sweden. This is the result of a loss of €187 million incurred in the first half of the year, while in the same period in 2007, the Swedish company made a profit of €2.3 million. To further prepare for the crisis, European manufacturers tried to obtain assistance from the European Union. ACEA, the European Automobile Manufacturers Association, sent an official request to the European Commission for funding ‘efforts to construct cleaner cars, as well as to preserve jobs’ amounting to $40 billion. However, it received an express rejection. – ‘Such a proposal is not even worth discussing,’ said Gunter Verheugen, Vice President of the European Commission, who also covers the industrial sector. Following his statement, ACEA issued a statement emphasizing ‘that the mentioned figure is only sufficient for two years of research and development of new cars.’ It also states that ‘in this financial situation, citizens will only buy cars that consume less.’

Salvation is in the East

While there is no response to the needs of car manufacturers in Europe, in the USA, President Bush has approved a law granting General Motors, Chrysler, and Ford $25 billion in non-repayable aid. These companies should primarily use this money to develop smaller and more economical cars. Indeed, the reckless development of large SUVs and pick-ups with large displacement gasoline engines and uncontrolled consumption has led to a decline in sales for American manufacturers even before the banking crisis. Now everyone is looking for a quick way to save themselves, by any means. One of them is Ford, which is also generating large losses, at least on American soil. Specifically, the Japanese television station NHK reported (citing unnamed high sources from Mazda) that Ford (which owns 40 percent of Mazda’s shares) is considering selling its stake.

According to the TV station, Ford wants to sell 20 percent of its stake in Mazda and thus quickly raise a billion dollars, money that it urgently needs in the USA, where it incurred a loss of $8.7 billion in the second quarter. However, perhaps the worst of all is that the industry was further unsettled when J.D. Power released its forecast for the state of automotive markets in 2009. According to it, ‘the global automotive market could experience a real collapse, primarily caused by uncertainty in the banking system that will lead to stricter credit approvals.’ Besides the USA, according to J.D. Power’s opinion, ‘significant slowdowns’ in the market will also occur in Europe (primarily Western), China, and India. The only bright spot is Russia, which is hungry for new cars, even more than China.