Vauxhall’s UK production hits an emergency stop

Posted on 25 Sep 2012

Production has been halted at Vauxhall’s Luton and Ellesmere Port plants for a whole week due to the slump in European demand.

The General Motors’ plants have been shut for five days due to falling demand for new cars across Europe.

Vauxhall is particularly susceptible to market fluctuations in Europe because 80% of its vehicles produced in the UK are sold to Europe as Opels.

A spokesperson for the company commented: “The Opel brand is suffering because of politics. Union pressures have hurt sales in Germany as people lose confidence in the brand.”

Production at the GM plants and engine facility in Germany has also been halted. The factories’ combined 3,300 staff are being paid despite the closure, with hours being banked in case of a future upturn.

“Mainland Europe is in dire straights so we’re exporting to a dented market,” the spokesperson told The Manufacturer. “Vauxhall makes up for 40% of all Opel sales which shows how badly mainland Europe is doing.”

A recent report from Morgan Stanley lead automotive analyst Adam Jonas, who replaced current GM vice chairman Steve Girsky in the role, reported that the Detroit-based company lost $16bn in its European operations, which include the Opel and Vauxhall brands, over the last 12-years.

GM has maintained its public stance that Opel will not be sold off despite ditching its target to break even this year, with the spokesperson reiterating that “this could mean getting rid of staff,” explaining that “whatever will be done will be done.”

“One of the worst things in the auto industry is owning a cash-burning, resource-consuming business,” wrote Jonas.  “We believe the time has come for GM to find a new home for Opel.”

You wonder whether GM vice chairman Steve Girsky would be saying the same thing should he be back in his Morgan Stanley shoes.

Vauxhall’s business model is arguably not suited to today’s economic environment, with small cars growing in sales in the BRIC countries but being made at low cost by domestic manufacturers, and high specification and luxury vehicles experiencing growth.

Around 50% of Vauxhall’s total sales in the UK are sold to fleet companies, a market which has been hit particularly hard by the economic downturn as businesses cut back.

In the past, Vauxhall has sold vehicles at a loss to fleet companies, but the spokesperson commented that this was a thing of the past – although heavy discounts are offered, which result in lower profit margins on its vehicles than other automotive manufacturers.

The company stated: “Our manufacturing operations are addressing market fluctuations as they occur, upturns with extra shifts, downturns with down days.”

“This is normal working practice in order to match supply with demand – vehicles are built to customer order not for stock.”

GM have said that closing the plants will prevent the build-up of stock and that shutting for five days made manufacturing sense, despite the press coverage that it inevitably resulted in.

The week off will allow the company to shut down fully and install robots needed for the manufacture of the new Vauxhall Vivaro van to be made in Luton and the Astra at Ellesmere Port.

Paul Everitt, SMMT chief executive, said today that “continued weak demand in Europe is a concern” as car manufacturing in the UK fell 7% last month.