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GM warns on 'crippling' costs in Europe

General Motors, the world's largest carmaker by sales, has warned that western Europe is running the risk of deterring manufacturing investment because of "crippling" labour and regulatory costs. Bob Lutz, vice-chairman, said Germany, where its Opel factories employ 36,000 workers, had the highest labour costs in the world, while the average European worked only three-quarters as many hours as an American.

"You can maybe see the day where it is a poor use of investment dollars to manufacture in western Europe," he said.

He added that the stagnant economies of the western states, excluding the UK, were down to over-regulation of product and labour markets, which inhibited investment.

The warning will be noted in particular by German trade unions and politicians. GM last week passed over a German factory in favour of a Polish plant to expand production of its Zafira family car. But, while acknowledging the country's high costs, those working in Germany point out other advantages.

Ralph Wiechers, economist at the VDMA heavy engineering association, says: “Germany continues to offer a high quality location for top engineering groups, citing its strong industrial infrastructure and highly-trained workforce.”

The VDMA reported a 23% rise in orders in the sector in May compared with the same month a year before, driven by a 34% increase in foreign orders.

Lutz called for trade unions, governments and companies to embrace changes to traditional practices in order to compete with an expected rush of exports from China.

Unions and government officials in the big western European countries have been growing increasingly uneasy about competition from new EU member states in the east. All the recent new car factories have been built in the Czech Republic, Slovakia or Poland.

"Western Europe is crippling itself with its unwillingness to adapt to changing positions," says Lutz. "Not enough has been done to rein in the incredible and ever-increasing cost of doing business in traditional locations."

Lutz's comments were echoed by suppliers of car components meeting at the Automotive News conference in Switzerland. One large US parts manufacturer looking for acquisitions in Europe said it was "certainly not" interested in setting up plants in the west. "Nobody's going to put manufacturing in western Europe," it said.

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