GM Europe To Cut 12,000 Jobs

General Motors Europe announced Thursday that it plans to cut 12,000 jobs on the continent by the end of 2006 in a plan aimed at saving $617 million per year.

The company said that 90 percent of the cuts would be made in 2005. It said the shake-up of the money-losing Opel, Saab and Vauxhall operations were necessary amid expectations of sluggish demand growth, a growing challenge from both European and Asian brands and price competition.

The plan "provides for the majority of the cuts to be in Germany, with a heavy emphasis on managing and engineering," the company said in a statement.

However, it said negotiations with employee representatives would determine which of its 10 European manufacturing plants are affected.

"The details we must negotiate with our workers councils, beginning today — and we hope to have an agreement by the end of November," GM Europe spokesman Ruediger Assion said.

GM Europe currently has 62,000 employees. The cuts represent about 19 percent of GM's European workforce, reports CBS MarketWatch.

"This is a pretty sober day for us," GM Europe chairman Fritz Henderson told reporters. "The impact — 12,000 people — is not just numbers, not just paper, it affects their families and communities."

"But it's apparent our business needs to be significantly improved. We are not making money."

Henderson did not rule out closing a factory, but added that the savings "can be accomplished without closing plants."

General Motors has shaken up the management of its European operations by combining some functions of its different brands at divisional headquarters in Zurich, Switzerland, and has built a new, efficient $650 million plant in Ruesselsheim outside Frankfurt, the home of its German subsidiary, Adam Opel.

Opel has won plaudits from analysts for improving a once-lackluster model line under former CEO Carl-Peter Forster, who in June was moved up to serve as president of the European operation.

But GM Europe has failed to stem persistent losses, reporting a $45 million net shortfall in the second quarter, despite increasing market share to 9.8 percent from 9.4 percent a year earlier.

"With losses since 1999 and no reasonable indication that market or economic conditions will improve substantially in the coming years, we have no choice than to take tough steps to ensure our long-term success," Fritz Henderson, chairman of GM Europe, said in a statement.

The company faces multiple woes, including too much expensive production capacity, labor costs in high-wage countries such as Germany, and indifferent consumer demand that has put pressure on pricing, especially in the mass-market segment where Opel competes.

Japanese and Korean manufacturers have made big gains against the American European car brands, while European demand for autos remains weak.

In September, Ford said it would close one of its Jaguar factories in the U.K. with a loss of 1,150 jobs, reports MarketWatch Volkswagen is also negotiating plans to shed a third of its German workforce over ten years with its labor unions.

The company has traditionally let its European brands design and manufacture cars separately, a practice it is now changing to achieve greater savings. It said Thursday it would pursue the integration of design and engineering between Opel and Saab.

Costly plants in Germany were seen as prime targets for possible job cuts ahead of Thursday's announcement. Both German plants are plagued by the country's high labor costs, with industrial workers putting in 35 hours a week and getting up to two paid months off a year.

Germany's economics and labor minister, Wolfgang Clement, scrapped a planned meeting Thursday with his French counterpart to travel to the western city of Bochum, home to an aging Opel plant where 7,600 employees produce the Astra model, for talks with the works council and local officials.