General Motors will cut production capacity in Europe by more than 400,000 units over the next four years - but it might not be enough.
More cuts will follow if Opel and Vauxhall sales don't pick up soon, say GM insiders.
GM will stop building Vectras at its 95-year-old Luton, England, plant in 2002 and will reduce production at other European plants. GM didn't specify the additional cuts, but did announce the closure of its Torbali, Turkey, plant in mid-2001. The plant builds 10,000 Vectras a year.
Currently, GM can build 2.5 million units a year at its 13 plants in Europe, including Saab's plant in Trollhatten, Sweden. But this year, GM Europe sales, with Saab, will fall below 1.9 million units, down from a more than 2 million units in 1999.
Overcapacity combined with price pressure in key markets caused GM Europe to post third quarter losses of $181 million. Analysts predict a deficit as high as $600 million in the fourth quarter.
Ford of Europe faces similar problems. Earlier this year it announced plans to stop building cars at its Dagenham, England, plant.
Luton will build 100,000 Vectras this year, down from 145,400 in 1999.
With Vectra production phased out in Luton, a second continental plant in addition to GM's Russelsheim, Germany, complex may build the upper-medium model.
GM is studying building the new Vectra at its factory in Ellesmere Port, in northwest England. That plant currently builds about 168,000 Astras a year.
'That would be our first option, if possible,' said a GM Europe source.
Charles Young, director of research at J.D. Power-LMC in Oxford, England, said Luton is 'a very cumbersome plant to operate.
'It is on four floors, penned in by an airport with no surrounding land that can be used for expansion or for supplier parks,' he said. 'It lacks the flexibility to manufacture all body types.'
Young believes some Vectra production will be moved into GM's Antwerp, Belgium, plant which currently builds only Astras.
'It is a modern, single-layer plant with the capacity for 400,000 units a year,' he said.
GM Europe could put Vectra into Antwerp by upgrading its Bochum, Germany, plant and adding a third shift there, said Young. Bochum currently builds Astra and Zafiras, and has capacity for around 300,000 units.
'We expect Bochum to move eventually from two to three shifts to manufacture a larger volume of Astras, making space in Antwerp for more Vectras,' said Young.
GM is spending DM9 billion (E4.5 billion) to overhaul the Russelsheim complex - the lead plant for Vectra, and the sole source for the full-size Omega. It is being transformed into a modern 'leanfield' production facility, ready for new Vectra in early 2002.
That will remove 200,000 units from GM's European capacity. In addition to the 150,000 units derived from the closure of Luton, GM sources said 50,000 units will be cut at various unspecified locations.
Slumping Vectra sales have crippled GM in Europe.
'The model is not performing as well as expected, mainly due to falling sales in Germany,' said a GM Europe spokesman in Zurich. 'You can't escape the fact that
the once-popular medium-size European sedan and hatchback class, is in steady decline.'
But the Vectra has under-performed others in the segment after quality problems plagued its 1996 launch. The car's mid-life facelift in early 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 fell to 2.4 percent two years ago, and in November stood at 1.4 percent.
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 the autumn, has yet to make an impact.
Sales of the outgoing model fell 10 percent to 386,000 in the first 11 months of 2000, according to estimates from JATO.
The lower-medium Astra is also suffering, with sales falling from 631,984 to 527,886 in the same period.
Opel/Vauxhall's overall share of western Europe's new-car market stood at 10.1 percent last month, according to ACEA, the European automakers' association. That's down from 11 percent in November 1999.