Global Insight Perspective | |
Significance | GM Europe plans to produce next Astra in four plants and invest 3 billion euro in development work and production ramp up. |
Implications | If this report is correct, it contradicts previous reports suggesting that GM Europe was planning to cut excess capacity of between 230,000 and 280,000 units at assembly plants manufacturing the Astra in Europe from 2010 by cutting jobs and possibly closing a plant. |
Outlook | As indicated by the next Astra plans, GM Europe is entering an expansive phase and is organising production to optimise the use of its current production capacity while looking for concessions from its workforce. |
General Motors (GM) Europe is reportedly planning to invest up to 3 billion euro (US$4.06 billion) to develop the next generation Opel Astra and scale up production of the high-volume hatchback, German daily Bild has reported. This somewhat corroborates a previous report in German newspaper Auto Zeitung that suggested production of the next Opel Astra will be organised at four European plants including the Bochum facility in Germany. Along the same lines, the Financial Times Deutschland has stated that GM would not close any plants in Europe but will continue its cost-cutting drive, asking European workers for pay concessions, more flexible working hours and possibly offering voluntary departure.
In contrast to previous speculations, GM Europe is going on the offensive with the next generation Astra. The model will enter production in 2010 and will use GM's Delta 2 platform, which also provides the underpinnings to the Zafira and Saab compact models. The carmaker will presumably spend about 3 billion euro to develop the model and raise annual output to 750,000 units from 520,000 units in 2006. Opel's plant in Bochum will continue to produce the model, thus allaying fear that the site could be closed at some point. Other production sites include Ellesmere Port (United Kingdom), Gliwice (Poland) and Trollhättan (Sweden). GM Europe declined to comment on the reports, but more details should surface in the next few days.
Outlook and Implications
GM had big hopes for the current generation Opel/Vauxhall Astra when it was launched in early 2004, just a few months after its perennial rival, the fifth generation Volkswagen (VW) Golf. New production plans suggest that the carmaker believes in the potential of the next generation Astra but will have to take a more aggressive approach if it is to succeed in what will become a highly competitive market segment from 2008 with the arrival of the Golf VI and Peugeot 308, followed by the new Renault Mégane in 2009 and next generation Ford Focus in 2010. Meanwhile the new Fiat Bravo, Kia Cee'd and Toyota Auris are taking their mark in Europe's C1 segment.
Before making a final decision of production allocation, GM is reportedly looking to cut the costs of the new Astra by some 450 million euro and significantly reduce assembly time. Given the recent shift in the European market structure and competitive pressures, the carmaker strives to garner more flexible work conditions from its European workers so it can adapt production to demand without incurring additional costs. As part of the latest restructuring effort, GM Europe has cut about 13,000 jobs in Europe and closed assembly plants in Western Europe. The company is expected to continue reorganising its European production operations to optimise the cost saving potential of its global platform strategy (see Hungary: 12 April 2007: Suzuki to Assemble Opel Compact Car in Hungary) and fill capacity with either new models (see Germany: 2 April 2007:GM Europe Ponders Small SUV Options) or by exporting more models to the United States (see Europe: 13 April 2007: GM Europe Workers Present Cost-Reduction Target, Oppose Potential Plant Closure). If those media reports are correct, Opel's Antwerp plant in Belgium may lose production of the Astra or simply take on assembly of the U.S.-bound version of the model and possibly fill capacity with some Chevrolet models.