General Motors Co. is preparing to disclose "horrendous" fourth quarter losses out of its European Opel/Vauxhall unit and is demanding deep cuts from labor unions there, a GM official said on Tuesday.
The official said the auto maker's patience with the money-losing operation is running out.
"There is increasing frustration with Opel and a feeling that the cuts two years ago did not go nearly deep enough," the official said. "If Opel is going to get fixed, it is going to get fixed now and cuts are going to be deep."
The comments send a message to labor leaders, particularly in Germany, that the company is more serious than ever about overhauling a European business unit that has lost around $14 billion since 1999.
GM executives are preparing a plan for its European operation that could include more plant closings and job cuts, according to people familiar with the matter, ahead of reporting what is expected to be a substantial 2011 loss at the unit. GM and the union are discussing moving some production to Germany from Korea, one of those people said, to offset job losses.
The Detroit auto maker's turnaround of its Opel and Vauxhall units hit a roadblock amid a European debt crisis that has added to GM's long-standing troubles in the region. Ford Motor Co. also posted a wider-than-expected $190 million fourth-quarter loss in Europe, which was four times the previous year's loss.
As part of the discussions, GM is considering closing assembly plants in Bochum, Germany, where it employs about 3,100 workers, and Ellesmere Port, England, where it has about 2,100 workers, these people said.
GM executives are eager to devise a plan, but they have yet to reach any deal with labor unions.
"The new management team has a productive relationship with the union and we are both committed to solving the challenges that confront the company together," GM spokesman Selim Bingol said. Mr. Bingol said the official's comments don't represent the company's official stance with the union.
GM, in addition to pushing for production cuts, is looking to reduce materials costs, save money on suppliers and reduce waste within the company, a person familiar with the situation said. The company also has been overhauling Opel's management team, the person said.
German unions are expected to fight the cuts and push GM to look elsewhere for savings.
The auto maker lost $580 million in Europe through the first nine months of 2011. On Feb. 16, GM is expected to report those losses widened in its fourth quarter.
Europe has become one of the biggest threats to GM's comeback and a significant factor in the company's lagging stock price. The company is devoting significant time and resources to fixing the operation. In recent months, GM Chief Executive Dan Akerson has dispatched four senior executives to serve on Opel's supervisory board.: Vice Chairman Steve Girsky, finance chief Dan Ammann, product chief Mary Barra and international operations chief Tim Lee.
Meantime, United Auto Workers union President Bob King will be in the middle of the talks if, as expected, he joins the Opel supervisory board, according to people familiar with the matter. Mr. King has sought to become more influential in the global labor scene. He has taken several trips abroad and talked publicly about the importance of working with other unions globally.
Union officials in Germany didn't return calls seeking comment. The UAW declined to comment.
Despite repeated restructuring efforts, Opel hasn't delivered lasting results. Any turnaround must overcome a regional sales slump that analysts expect to linger for years amid expectations for a return to recession in the European Union this year.
Car sales in Europe were down 15%, to 12.8 million vehicles, in 2011 compared with 2007, and the decline is expected to continue this year. On Tuesday, LMC Automotive, said it expects sales in Western Europe to decline an additional 5.9% in 2012, to 12.05 million cars and trucks.
Efforts to revive the company have been stymied by high costs relative to rivals such as Volkswagen AG, and image problems stemming from GM's failed attempt to sell the unit in 2009. Unlike in the U.S., where GM slashed its debt and closed unprofitable factories during a stay in bankruptcy court, Opel never went into insolvency proceedings, Europe's version of a bankruptcy restructuring.
Despite weak fourth-quarter results, analysts expect GM's 2011 results from operations in Europe be an improvement from the previous year.
This time, the company is looking to go much deeper, and to significantly reduce the company's breakeven point in Europe so it can survive despite depressed sales, those people said.
Doing so will be especially tough in Germany, where influential labor unions for years have fought off plant closing and job cuts. Though industry analysts and an increasing number of auto executives are calling for plant closings and capacity reduction in Europe, few auto makers have managed to downsize, with GM implementing the deepest cuts.
GM's 2009 restructuring plan for Opel called for cutting 8,300 jobs across Europe and closing a factory in Antwerp, Belgium, while increasing spending on new vehicles.
In March, GM's Mr. Akerson replaced Nick Reilly as head of Opel with Karl-Friedrich Stracke, GM's no-nonsense, German-born global engineering chief.
The auto maker also is expanding sales of its Chevrolet brand, which for years mainly was sold in Eastern Europe, into Western European auto markets. This could help increase GM's profitability in the region, but has Opel executives concerned about the effect additional competition could have on the unit's turnaround.
Opel's new labor chief, Wolfgang Schaefer-Klug, said last month that he expected a first draft of a new labor deal to be finalized by the end of January, but so far that plan has not surfaced.
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