GM to cut production in Europe by 40,000 vehicles as sales slide

Temporary shutdowns to affect Vauxhall output at General Motors' Luton plant

General Motors is cutting vehicle production in Europe and extending temporary shut-downs at its plant in Luton, in the UK, as it grapples with sliding car sales.

The owner of the Vauxhall brand made the announcement to its Luton employees yesterday as part of a plan to cut its European output by 40,000 vehicles. That means it will produce 2.3 per cent fewer vehicles in Europe this year than originally planned.

Its German operations are being particularly hard hit, and its one factory at its Adam Opel subsidiary there will shut one for a full three weeks.

"We're feeling the effects of the financial crisis," an Opel spokesman said. "People are holding on to their money and not ordering cars."

GM's Opel facility in Zaragoza, Spain, is also to stop production for two weeks in October and the company said it is looking at similar measures at plants in Poland, Sweden and Belgium.

The Luton Vauxhall plant was shut for a single day last month, to reduce its output, and further cuts will follow as GM attempts to match output with slumping demand.

Elsewhere in the UK, its rival Ford began a 17-day shutdown of its Southampton factory, where it produces Transit vans, at the start of October. With sales figures for last month starting to come in, analysts said the outlook is grim. "Early indications of West European car sales point to a wholesale slump across the major markets during September," said Paul Newton, an analyst at Global Insight. "The figures will send a shudder through the entire industry, as the slowdown in showroom traffic seen over the traditionally quieter summer months worryingly extends into the stronger selling month of September."

Mr Newton said he expects British September car sales down as much as 20 per cent, Spain down at least 25 per cent, Italy down 12 per cent and Germany's down between 5 and 10 per cent.

Yesterday was a black day across the European auto industry. As well as GM's announcement, BMW, Daimler and Ford's German subsidiary all revealed new production cuts. Italy's Fiat and Renault of France likewise said they would slow down their factory production lines.

Rising fears over the economy have kept consumers from splashing out on new vehicles, adding to the ongoing impact of high fuel prices, which has been damping demand for much of the past two years.

The American carmakers are finding life toughest of all, since sales in their domestic markets have fallen off a cliff. Last week, they revealed that September sales figures were down 26 per cent on average. Compared with the same month a year earlier, sales declined by 34 per cent at Ford, 33 per cent at Chrysler and 16 per cent at GM, which fared relatively better because it cut prices.