Opel/Vauxhall: why the new crisis?


The rumours that GM in Detroit is ordering massive cutbacks at subsidiary Opel/Vauxhall seem odd at first glance. Back in 2009, when GM went bust, it tried to offload Opel/Vauxhall to a parts manufacturer called Magna – a Canadian/Austrian company with finance from Russia.

At the last moment, GM changed its mind and decided to keep its European subsidiary in order to maintain its status as a global car company. The idea was that Opel would be restructured (Vauxhall was already pretty lean in manufacturing terms) and good new models would boost sales.

So what has changed since? Nothing - which is exactly the problem. Announcing the closure of a car factory in Germany is politically impossible – you might as well go on TV and say your favourite sport is seal-clubbing.

That is why no major German car factory has closed since 1945, and meant the only cut Opel could find was one rather small plant in Antwerp, just across the border in Belgium.

Opel carried on with far too much capacity and when the Euro crisis hit, cutting car sales across the continent, Opel had nowhere to hide. Even Ford, which has been far more professional in cutting supply to meet demand, lost $27 million in Europe last year; Opel's figures are likely to be a lot worse when they are released.

Now GM in the USA has lost patience. It has pumped in money to cover an unbelievable $11 billion (£7bn) in losses since 1999 and reasonably asks why US workers, whose numbers have been decimated, should continue to subsidise wealthy German employees.

Without a doubt, at least one more factory needs to close. The two leading candidates are thought to be Bochum in Germany (which should really have closed in 2009) and Ellesmere Port in England.

That would certainly be unfair on Ellesmere Port, as it is one of GM's most efficient factories and is based in the UK, where the relatively weak pound makes it a low-cost plant. However, it is not in Germany, which makes it politically easier to close.

The worst-case scenario for Opel/Vauxhall is truly dire. There are voices in the US saying that Chevrolet should become the global family car brand and a few European factories should make Chevrolets instead of Opels.

That seems unlikely, but Opel is finally going to have to face up to reality. It has been in denial for over 10 years now, but reality has a nasty habit of intruding in the end.