The General Motors logo is seen behind the American flag. (Photo : Reuters)
General Motors' latest decision to shut down its first German manufacturing plant, which opened during World War II, as a clear indication of gloomy auto industry in Europe.
"One would need to close at least one factory per volume manufacturer in Europe, which would be about five factories in total," said Philippe Houchois, an analyst with the UBS based in London, in an interview with Bloomberg Businessweek. He further adds that automakers such as Renault, Peugeot, Fiat and Ford Motors also have plans to shut down their plants sometime within the end of 2012.
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Even after the political pressures from the German ministers, General Motors have taken a decision to shut down their unprofitable plants. The car company shut down its manufacturing plants in Belgium and a Fiat factory in Sicily. It was also forecasted in the beginning of this year that overcapacity in Western Europe may increase to double to about 2 million vehicles. According to the European Automobile Manufacturer's Association (ACEA), "The region's car market will contract 7 percent this year." But now looking at the shutting down of plants and the Europe is facing a gloomy economy seems to hamper the automaker's plans for this year.
"Even the General Motors seems to need five years to close down its most marginal plant. The prolonged closure highlights once again that there will be no easy or indeed quick solution to the European overcapacity problem," said David Arnold, a sales specialist with Credit Suisse based in London, while speaking to Bloomberg Newsweek. The announcement by the General Motors to shut down its plant in Bochum, Germany, is clearly reflecting the difficulties faced by the automakers. The auto experts opine that one of the other reasons for shutting down would be that the Germany has lost the capacity to manufacture vehicles on its own like in the U.S., and China and will now have to take orders before launching vehicles directly to showrooms.