Opel Confirms Cuts to German Output

General Motors Co.'s Opel unit says it will eliminate 20 working days from September through December at its main assembly plant in Russelsheim, Germany, and a nearby engine factory in Kaiserslautern.

Opel is taking the measures after a feeble first half in which it posted a $617 million operating loss (€492 million), and it European sales dropped 15% to 467,900 vehicles. Curtailing work hours will reduce labor costs and trim excess inventories of the Astra compact hatchback and Insignia midsize sedan built in Russelsheim.

Barclays Capital analyst Brian Johnson estimates the move will save the company about $50 million (€40 million). But Johnson predicts Opel will still lose $906 million (€722 million) in the second half of this year. Analysts note that abbreviated hours are only a temporary solution to the company's overcapacity problem.

Opel says the cuts will affect manufacturing, administrative and service staff but not engineering employees or about half its 13,800 workers in Russelsheim and all 2,500 employees in Kaiserslautern.

The German government will compensate workers for as much as two-thirds of their lost wages. The company negotiated the short-time work program with its works council and the IG Metall union, which say the plan will preserve jobs.