LONDON - Even though General Motors will cut production capacity in Europe by more than 400,000 units over the next four years as part of the restructuring plan it announced last week, company insiders admit that even more reductions may be needed to bring capacity into line with sales.
GM can build 2.5 million units a year at its 13 plants in Europe, including the Saab plant in Trollhatten, Sweden. But its sales this year will fall below 1.9 million units, from 2 million units in 1999, while West European share has fallen to 10.1 percent, from 11 percent, according to ACEA, the European automakers' association.
Reflecting the overcapacity problem, GM posted a third-quarter loss on European operations of $181 million, and analysts predict a deficit as high as $600 million for the fourth quarter.
Plants in England, Turkey
As the centerpiece of its European restructuring, GM will shut passenger-car operations at its 95-year-old plant in Luton, England, in 2002, and reduce production at other European plants. GM didn't specify the additional cuts, but said it also will close the Torbali, Turkey, plant in mid-2001. The plant builds 10,000 Vectras a year.
Luton will build 100,000 Vectras this year, down from 145,400 in 1999.
With Vectra production phased out in Luton and Torbali, GM is studying options for adding the car to either Ellesmere Port, in northwest England, or Antwerp, Belgium. The car, which is marketed in the upper-medium segment, also is built at GM's main plant in Russelsheim, Germany.
Many of GM's current problems in Europe can be traced to low demand for the Vectra, which carries a heavy responsibility for generating profit.
'The model is not performing as well as expected, mainly due to falling sales in Germany,' said a GM Europe spokesman in Zurich, Switzerland. 'You can't escape the fact that the once-popular medium-size European sedan and hatchback class is in steady decline.'
Early quality problems
But the Vectra has underperformed others in the segment after quality problems plagued its 1996 launch. The car's facelift early in 1999 did little to help.
The previous-generation Vectra peaked at 3.6 percent of Western Europe's new-car market in the early 1990s. That share fell to 2.4 percent two years ago and to 1.4 percent in November.
Meanwhile, the successor is still more than a year away.
The Zafira MPV and Agila minicar are selling well, but GM isn't getting much help from other main segments.
The new Corsa, which went on sale in fall, has yet to make an impact, while sales of the outgoing model fell 10 percent to 386,000 in the first 11 months of 2000.
Sales of the lower-medium Astra, GM's highest-volume model, have tumbled 16.5 percent in the same period to 527,886.