General Motors, owners of the Opel, Saab and Daewoo brands among others, is to lay off almost one in five of its 62,000-strong European workforce to lower costs by about €400 million a year.
An announcement is expected tomorrow. German group Opel will bear the brunt of the 12,000 job losses, but sources say GM will stop short of factory closures.
The decision to cut more than 6,000 of the 32,000 GM jobs in Germany will come as a further blow to trade unions struggling with demands from other manufacturers for pay freezes and longer hours. Two of GM's biggest factories will remain under threat, with a decision due next year on whether to build the new Vectra and Saab 9-3 mid-sized cars in Rüsselsheim, near Frankfurt, or at Saab's Trollhättan base in Sweden.
GM's restructuring follows the failure of its three-year- old Project Olympia to lower costs and return the firm to profit in Europe. It had hoped to make up to €80 million this year from its European brands but has warned it will make another loss. Morgan Stanley forecasts a net loss of €380 million for the European division this year.
"We have got to get it together," said one GM source. GM executives in the US have been increasingly frustrated at regulatory and labour restrictions in Europe. Last month John Devine, chief financial officer, warned that the continent's manufacturing future was under threat.