The Opel division of General Motors Co. (NYSE: GM) has been unprofitable for so long that the U.S. automaker has more than once considered shutting the operations down. Today, however, Opel lives on after the company negotiated a 'short-time work' deal with the German government.
Under the terms of the deal, GM will introduce short-time work at two of its German plants for the period from September through December of this year. The deal gives GM flexibility in the number of hours that employees work, but maintains workers' salaries by having the state pay workers for the unworked hours.
Passenger car sales have fallen off a cliff in Europe, and carmakers including Ford Motor Co. (NYSE: F), Italy's Fiat SpA, and GM have too many plants, too many workers, too much equipment, and not enough buyers. One analyst has suggested that GM could lose $1.5 billion at its Opel division in 2012.
Part of GM's trouble stems from its decision to sell Chevrolet-branded cars in Europe to the same low-end market at which Opel cars are aimed. GM has pumped $1 billion into a Chevy plant in Russia in an effort to increase production to 230,000 vehicles annually, more than double current production. Another joint venture plant in Russia can produce 350,000 vehicles annually. Selling more Chevys only cuts into Opel's sales and the cuts are deeper than the gains. At some point - probably not too far into the future - GM will figure out that continuing to support Opel is not worth the price.
GM's shares are inactive in the pre-market this morning, and closed at $21.73 yesterday in a 52-week range of 18.72-$27.68.
Filed under: 24/7 Wall St. Wire, Autos, Economy, International Markets, Labor & Unions Tagged: F, GM