Nick Reilly, newly-appointed CEO of GM Europe, has announced that the company will close its Antwerp production facility by the end of the year. Interestingly, aside from the angry reaction of union members, there was little shock registered in the automotive community.
This is because it was no spur-of-the-moment decision. The Antwerp plant has been underperforming for years, recently running at 30% of capacity. Reilly later noted that plans to build a mini-SUV at the facility were just that, and without concrete investment for the future, it would have been reason enough to pull the plug.
But there’s more. To make money building cars in western Europe, carmakers must build premium products. Ford, for example, builds its Mondeo in Genk, Belgium. Smaller cars for the European market are made in areas with lower overheads; the Ka, built alongside the Fiat 500 in Tychy, Poland, is a case in point. While the Ka retails for approximately £8,000 and the Mondeo for £18,000, there’s not £10,000 difference in the manufacturing costs of these models – the difference is profit. While customers may find the ‘P-word’ unappealing, it’s a necessity if manufacturers plan to stay in business.
Located in Belgium, the Antwerp plant was producing the previous-generation Astra and Astra Twin Top (hardtop convertible), the same model being built at Vauxhall’s Ellesmere Port, UK plant until that facility switched to producing the latest model. The Astra, while a good car, is not a premium product, and built in the high-wage area of northern Europe, there was little profit in the little product Antwerp was delivering to market.
Compared to GM, Hyundai/Kia is a comparatively recent entry to global automotive production. As such it has benefitted from being able to pick and choose where it builds production plants; they are generally in central locations with the infrastructure to receive and deliver parts and cars to the surrounding region, invariably an area of comparative sales growth. Likewise, until the closing of its Long Beach, California joint-venture with GM, Toyota had not closed a plant. This is not due to good luck. This is because the company has not been involved in global production long enough to be adversely affected by static regional markets.
While GM has also been building new plants in areas of anticipated growth, most recently in Russia, India and Mexico, Antwerp was built 1924, when Europe - and everywhere else – was a growth market. Unfortunately, the plant is now located in one of the most stagnant regions (in terms of sales) in the world. Closing the plant removes the need to subsidize production, the money more wisely spent on better-placed production outlets.