GM warns of 'significant restructuring' for European arm

General Motors warned yesterday of the need for further "significant restructuring" of its loss-making European operations, which include the UK subsidiary Vauxhall.

An announcement is expected by the end of September once the company has completed a root and branch review of its operations in Europe, codenamed Project Olympia.

The review was initiated by the new chairman of GM Opel, Carl-Peter Forster, who took over in May. Mr Forster said that Opel and GM Europe had some "serious structural and cost issues that need to be resolved urgently". He added: "Some difficult decisions will have to be made quite soon."

GM Europe has already announced plans to reduce its car-making capacity by some 400,000 units by 2004 and cut 5,000 jobs, or 10 per cent of the workforce, this year. The cutbacks include the ending of car production at Vauxhall's Luton plant early next year with the loss of 2,000 jobs.

However, the latest comments from Mr Forster make it clear that the cost-cutting needs to go much further if GM is to achieve its goal of returning to profitability in Europe.

Last year GM lost $257m (£181m) in Europe and in the first three months of this year it made a loss of $86m. Announcing the first quarter results in April, GM's chief executive Rick Wagoner said that although GM had taken tough action to restructure its European operations, the market was proving weaker than expected.

GM refused to comment on whether the review, being conducted with the help of the management consultants Booz Allen & Hamilton, would result in more plant closures. A spokesman said it would cover all aspects of GM's operations from manufacturing and sales to warehousing and branding.