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European automakers ready for Detroit-like cuts

European automakers, who long resisted laying off workers and closing plants, are now rolling up their sleeves and preparing for deep cuts, similar to those the American auto industry has seen.

By Laurence FrostReuters / September 2, 2012

A worker tries to fix a Peugeot engine at a car scrap yard in the central Bosnian town of Zenica August 15. Europe's second-largest car maker posted a 662 million euro ($800 million) first-half loss in its auto division, dragging its group bottom line into the red - as it had warned earlier this month when announcing 8,000 French job cuts and a plant closure.

Dado Ruvic/Reuters

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Paris

Europe's volume carmakers are returning from summer breaks with their sleeves rolled up, ready to shut plants and lay off staff in what many see as an overdue push to cut costs as their US counterparts did three years ago.

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In 2009, when the United States rescued General Motors and Chrysler from bankruptcy on condition they close plants and slash jobs to rebuild profits, European governments responded to a slump in vehicle sales by offering car firms aid to do the opposite - maintain employment levels in the hope of a swift recovery.

Three years on, and with no sign of an end to a European economic crisis that has crushed demand for cars in core Mediterranean markets, French and Italian makers, along with GM's German Opel unit and Ford's regional division, face less resistance from politicians and labour unions as they present cuts as an alternative to risking outright collapse.

Governments, including the newly elected Socialists in Paris, no longer have funds to bail companies out, and some union leaders are calculating that cuts now can save more jobs later - though few expect workforces, which have in some cases already been substantially eroded, to take plant closures quietly.

But American auto consultant David Cole said he expected major restructuring to get under way as Europeans faced the choice to "sacrifice a battalion in order to save a division".

"Everybody has decided this is the right time to make structural changes," said Cole, a former head of the Center for Automotive Research in Ann ArborMichigan.

"When they see that a company could disappear with all its jobs, they may realise it's better to lose 20 percent."

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