GM Europe Saves Ellesmere Port Plant

General Motors (GM) has confirmed today (17 May) that it has secured production of its next-generation Astra at its Ellesmere Port (UK) plant. In a statement, the company said that it will be the lead plant out of only two in Europe to manufacture this vehicle.

GM stated that Ellesmere Port had won the contract thanks to a "ground-breaking new labour agreement" which was voted on and approved by its workforce yesterday (16 May). The agreement, which comes into force in 2013 and runs through the life of the next-generation Astra, into the early 2020s, will see improved flexibility and reduced fixed costs to become one of its most competitive plants. From 2015, the site will work on a three-shift pattern and is expected to run profitably at full capacity utilisation with a minimum of 160,000 units to be produced each year. 

The site will benefit from GBP125 million (USD159.1 million) of investment in order to upgrade it to the latest technology and prepare it for production of the new model. GM expects to create around 700 new direct jobs in order to facilitate the three-shift operation as well.

Other improvements will see the company raise the levels of local sourcing for the vehicles built at the site to at least 25%. This is expected to create further employment opportunities locally and in the UK overall and further increase the plant's competitiveness.

Outlook and Implications

Having been earmarked as a possible closure target by GM as part of its European restructuring, there have been growing reports during the past couple of weeks that enough had been achieved to avoid this happening. The deal has been reached with the full support of unions and workers—94% out of the 2,100-strong workforce have reported agreed to the new measures. This is also said to include the end of fixed plant closures taking place around every six months. The decision to improve the levels of local sourcing will see this rise from the current level of 10% and cut the cost of component moving, which will no doubt have been an attractive option for GM when combined with the high levels of efficiency already on offer. The UK government may have also gone some way towards influencing the decision, with UK Business Secretary Vince Cable having visited GM's chief executive officer (CEO) Dan Akerson and vice-chairman Steve Girsky when the first fears of its closure re-emerged in February. No financial inducements have been offered to secure the future of the site in this case, although GM will be eligible to apply for some support from bodies such as the Regional Growth Fund (RGF). The UK government's Department for Business, Innovation and Skills (BIS) is also seeking to enhance the UK automotive supply chain through other initiatives and support, which will no doubt enable GM to develop its local supply chain.

The is the latest positive news for the UK automotive sector, as other automakers have also announced significant investments during the past couple of years. Jaguar Land Rover's (JLR's) site near Ellesmere Port in Halewood has undergone something of a resurgence in recent times thanks to the launch of the Range Rover Evoque. This small premium sport utility vehicle (SUV) has taken the market for this type of vehicle by storm and will result in it adding a further 1,000 jobs at the plant to bring about a third shift. JLR is also set to invest in its other plants with GBP200 million set to be spent at its Castle Bromwich facility and a further GBP355 million in a new engine plant in Wolverhampton as part of its corporate expansion plans over the next five years. Others undertaking investment in the UK include Nissan at its Sunderland site which is committing hundreds of millions of pounds to bring the Leaf electric vehicle (EV), the next-generation Qashqai and new B- and C-segment vehicles to the factory. Production of the Leaf will also be joined by investment in manufacturing key components such as batteries. Mini is also investing GBP500 million to build the next generation of this popular premium hatchback, while Toyota and Honda have also confirmed decisions to build new vehicles here. These decisions will hopefully go some way toward helping reinvigorate the supply chain and help the country to maintain its new-found position as a net exporter of vehicles for the first time since 1976. Data presented by Prime Minister David Cameron to the House of Commons yesterday (16 May) has shown that the UK exported GBP6.1-billion-worth of cars, a net surplus of GBP561 million, during the first three months of 2012.

Now that this decision has been made, it now remains to be seen what GM will need to do to stem the flow of losses at its European operations. Many see that the closure of one of its plants remain paramount given the falling demand and the excess capacity it has. Following the closure of its Antwerp (Belgium) site previously, and the beneficial environment for working in Spain and Poland, the only other option would appear to be one in Germany. With Eisenach receiving the new A-segment Adam, this would leave a decision between its home site in Rüsselsheim and Bochum. The formers research and development (R&D) centre will retain Epsilon-based activity and manufacturing may well be retained here due to the engineering presence. There have also been reports that this site could also become a production centre for PSA's D-segment models under the alliance allowing it to shift the Astra out of here with fewer problems, although this would no doubt cause uproar in France. Previous evidence suggests that a strategy of taking production out of each site and splitting will not work though, and therefore would seem to leave Bochum very much at risk at the current time. However, we will have to await GM's final decision on the matter.