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ECONOMY

Opel to stop Astra production in Germany

Production of Opel's key Astra model is to cease at the struggling German carmaker's Rüsselsheim plant, a newspaper reported on Sunday - in favour of cheaper labour in Poland and the UK.

Opel to stop Astra production in Germany
Photo: DPA

According to the Frankfurter Allgemeine Zeitung, the drastic decision by Opel’s US parent company General Motors is meant to reverse a long sequence of losses. But workers say it could jeopardise the future of Opel’s parent plant.

The Astra hatchback is, along with the Corsa, Opel’s most important model, with an annual production volume of around 330,000.

If plans to remove it from Rüsselsheim go ahead, one unionist said it would be comparable to stopping production of the Golf at a Volkswagen factory.

According to the proposals, from 2015 the Astra would only roll off the production line at Ellesmere Port in England and Gliwice in Poland. The mid-range Insignia saloon would become the sole model produced at Rüsselsheim.

The FAZ says the decision will not be officially announced until mid-May, and a company spokesman told the paper there would be no comment until the conclusion of “ongoing talks.” But behind the scenes unionists say that GM vice president Stephen Girsky, president of the Opel board of directors, has made up his mind.

For GM and the Opel management under Karl-Freidrich Stracke, the move is a desperate measure to cut costs.

Since 1999, Opel has cost its parent company $16 billion. The European arm of the US giant, recently described by the GM chief Daniel Akerson as a “building site,” is this year set to notch up its sixth consecutive loss.

It is against this backdrop that GM has decided to refocus operations to the UK and Poland, where the workers are cheaper and more flexible.

Their willingness to work 40-hour weeks and up to 80 Saturday overtime shifts a year should allow for the production of an extra 115,000 units a year, according to projections.

But workers at the Rüsselsheim factory insist they can be part of a coherent cost-cutting strategy.

Their works council, led by Wolfgang Schäfer-Klug, has tabled a last-ditch counterproposal to Girsky, offering to finance the investment that would be needed to produce the new Astras at their plant through pay cuts and other money-saving measures.

It’s not the first time that German Opel workers have been left fearing for their future. In the past three years, GM has slashed 8,000 of its 48,000 European jobs, and in June last year, rumours that the company was to be sold to a Chinese bidder prompted Angela Merkel to call for clarity for Opel’s “hard-working” employees.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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