GM Europe Initiates Major Restructuring Plan

Zurich - General Motors Europe today announced a major restructuring plan to improve its market position and return its business to profitability.

This year's downturn of the Western European vehicle market and GM's market share performance in many of the individual countries, combined with shifting consumers' preference to smaller vehicles, and intensified downward pressure on vehicle prices, led to a 3rd quarter loss of $181 million. With industry conditions continuing to deteriorate, a much larger loss is expected for the 4th quarter.

This restructuring plan, combined with continued investment in an aggressive future product program has the objective of generating savings sufficient to return GM Europe to profitability.

In the manufacturing area, Vauxhall intends to undertake a major restructuring of its manufacturing operations. It is proposed that in Luton, production of the Vectra would move to one shift early in 2001, and would cease at the end of the life of the current Vectra model, which will be by the end of the first quarter of 2002. From this point forward, the remaining Luton facilities would concentrate on commercial and offroad vehicles, while passenger car production would be concentrated at Ellesmere Port. This means that the new medium-duty van, the Vivaro, and the Frontera would be produced at Luton. Ellesmere Port will continue to produce the Astra and a study is being made to possibly incorporate the next-generation Vectra and turn the facility into a two-model flex plant.

In total, these specific actions in the UK, and those previously announced, including the “leanfield” conversion of Opel’s Rüsselsheim manufacturing site, will reduce GM Europe's installed capacity by more than 400,000 units between now and 2004. Going forward, capacity utilization across GM’s European operations will continue to be evaluated. In addition, lean manufacturing implementation will be accelerated across all European plants, to obtain the productivity levels currently demonstrated at Opel’s benchmark Eisenach facility.

In the sales, marketing and administration areas, GM Europe intends to drive efficiency measures and to achieve significant savings at the national sales offices in the various European countries and regions. The migration of certain financial and administrative functions to the company's European Financial Shared Services Center in Spain announced in May of this year will be accelerated, so that projected savings will be achieved earlier.

Taken together, these various restructuring activities, as well as a number of other actions, are expected to reduce overall employment levels in Europe by more than 5,000 people within the next 18 months, consistent with the objective of reducing salaried headcount by 10 percent by the end of 2001.

Another portion of the planned savings will come from further material cost reductions, driven in part by synergies derived from GM's recent alliance with Fiat. In addition, improvements in current product material cost will be accelerated by the establishment of a dedicated joint purchasing/engineering project team that will work with GM Europe’s supplier communities.

With regard to product development, it is planned to maintain investment levels that have increased in the past few years to support an aggressive future product line-up for GM Europe’s brands. Opel/Vauxhall are currently reevaluating their future vehicle portfolio, in order to focus on delivering more innovative, segment-defining product entries. As an initial consequence, Opel decided to discontinue plans for the introduction of an Omega V8 version. Saab, over the next five years, will considerably enlarge its product offer in line with its growth strategy for Europe and the U.S.

Michael J. Burns, President of General Motors Europe, said: "The restructuring plan announced today is far-reaching, but essential for bringing the company back to profitable growth. The reduced cost base, combined with our aggressive new vehicle portfolio focus, will ultimately provide the best guarantee for our future success."