Decision to close two Vauxhall plants for one week comes after warning that eurozone crisis has hit car purchases
General Motors is stopping production for a week at the Vauxhall plants in Ellesmere Port and Luton after warning that the eurozone crisis has hit car purchases on the continent.
The sites will stage a “down week” from 24 September after Vauxhall decided that a prolonged hiatus would be preferable to a stop-start regime over the winter as European demand fluctuates. The move comes less than four months after Ellesmere Port was saved from closure, preserving 2,100 jobs, having secured a deal to build the next-generation Astra at the Wirral-based factory.
A Vauxhall spokesperson said: “As a major exporter and following the downturn in mainland Europe, Vauxhall manufacturing operations in Ellesmere Port and in Luton are implementing a down week [beginning] 24 September. This is to avoid building up stock by balancing inventory with customer orders.”
The Luton plant employs 1,100 people and makes the Vivaro van. The Unite trade union, which played a key role along with business secretary Vince Cable and Vauxhall executives in saving Ellesmere Port, said workers would be paid during the shutdown.
One worker at the Ellesmere Port factory, speaking on condition of anonymity, said the plant’s problem was simple: “They’re building more cars than they can sell at the moment.”
Car workers all over Europe are returning from their summer break to find that they are being forced to take a further holiday from the shop floor, with stoppages of up to three weeks in some factories. The Renault plant at Douai in France is shutting for four days this month, while the Fiat factory near Naples is being mothballed for a fortnight, GM’s Russelsheim site is closing down for 20 days and Ford’s Cologne factory will be out of action for three days.
Demand for cars in western Europe is faltering under the pressure of the protracted eurozone crisis, with the Alix Partners consultancy expecting car deliveries to fall by 800,000 this year to 13.6m. According to Alix, that will be 19% below the peak of 16.8m vehicles in 2007, when carmakers were basing production plans on a prolonged boom in demand. The decline in car sales has left volume producers such as Fiat, Renault, Ford and GM with a capacity glut.
David Bailey, a professor at Coventry University business school, said the European industry was in “dire straits”. The British car industry has been partly sheltered from the eurozone crisis by its strong premium car industry, with the likes of Jaguar Land Rover, Bentley and Mini benefiting from surging demand in emerging markets such as China. Nissan, Toyota and Honda, mass-market producers who have a significant presence in the UK, have also ducked the worst of the downturn so far because they are relative newcomers to the European market without a cumbersome production legacy.
Bailey said that a much talked-about reckoning in the European car industry might finally happen because cash-strapped governments cannot bail out their car industries as they did in 2008 and 2009. “The industry is entering a very difficult period. Analysts are speculating whether we are finally going to enter a grand restructuring. What is different this time is that governments do not have the money to give to the industry.”
About 1.34m cars were made in Britain last year, an increase of 6% on 2010.