Ellesmere Port fate remains uncertain, warns GM

General Motors refused to be drawn on speculation that the plant faces the threat of closure with the loss of 2,800 jobs – but confirmed factory capacity is under discussion

General Motors has warned that car production in Europe is suffering from a capacity glut as a loss of $747m (£473m) at its European arm dented an overall profit of $7.6bn at the world’s largest carmaker.

GM executives refused to be drawn on speculation that the Ellesmere Port plant in the UK faces the threat of closure with the loss of 2,800 jobs, but confirmed that factory capacity will be among the issues under discussion as it launches a drive to hit break even after years of losses in Europe. GM has already held high-level talks with British politicians and trade unions over its European operations – described on Thursday as having performance that is “simply unacceptable”.

Dan Amman, GM’s chief financial officer, said: “We have seven general assembly plants in Europe. It is clear, based on the overall industry right now, that the industry is in an overcapacity equation.” However, Amman said GM’s European problems cannot be solved by focusing solely on production capacity: “People should not be under the presumption that this is a capacity problem only.”

The president of GM Europe, Karl-Friedrich Stracke, said the company’s sites would be discussed with trade unions and its works council. However, he would not comment when asked if Ellesmere Port and a plant in Bochum, Germany, were under threat. “It is premature to say anything on plant closures,” he said.

Factories are shielded from closure until 2014 as part of a previous restructuring agreement with the workforce. Nonetheless, serious discussions are already under way with UK trade unions and politicians, including a meeting this month with the business secretary, Vince Cable. GM produces 1.4m cars a year in Europe under the Vauxhall and Opel brands and sources close to discussions say it may seek to reduce that number by 400,000 units – the equivalent of two factories.

Announcing record overall profits, Dan Akerson, GM’s chairman and chief executive, hinted that the European operations face an overhaul: “I think there’s a general recognition by all constituencies that the situation in Europe today is not a whole lot different than it was in the US, or North America generally, three-plus years ago.”

The 2011 profit, up from $4.7bn last year, was boosted by a recovery in North America, where sales rose and buyers paid higher prices for vehicles, and steady growth in China. The profit was 62% higher than last year’s and beat GM’s previous record of $6.7bn in 1997. GM’s 47,500 eligible workers will receive profit-sharing cheques of up to $7,000, a record.

The company is also struggling to revamp its business in South America, where it lost $122m for the year, compared with a profit of $818m in 2010.

“We will build on these results as we bring more new cars, crossovers and trucks to market, and make GM a far more efficient global team,” said Akerson.

It has been less than three years since GM emerged from bankruptcy after the car firm had to be bailed out by the US taxpayers. The government now owns 26.5% of GM.

Global sales rose 7.6% last year to 9.03m vehicles.

But Europe remains a major concern. In a conference call Ackerson said: “I think there’s a general recognition by all constituencies that the situation in Europe today is not a whole lot different than it was in the United States or North America generally three plus years ago.”

He said there was a “constructive engagement” about the need to tackle the firm’s problems in Europe. “Everybody around the table understands that there has been a material change for the outlook for the European economy generally. It’s in the paper every day and certainly in the consumer’s mind,” he said.

“This has been a year of good progress, but there is a lot more work to do,” Dan Ammann, GM’s finance chief, said. “We obviously have a long way to go to get to the objectives we want to get to.”

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