VAUXHALL dealt a hammer blow to the UK fleet industry by announcing the end of car production at its Luton plant. The news took the motor industry by surprise when it was announced at a press conference in Detroit.

Vectra production at Luton will be scaled down next year, before ceasing completely in 2002, when the fleet favourite will be replaced by a new upper medium contender.

Production of the Frontera off-roader and Vivaro vans will continue at Luton and Astra will still be built at Ellesmere Port, with the possibility of a new line being added to build the Vectra replacement at the Merseyside plant. Sales and support operations will remain at Luton, but will be subject to a wider streamlining programme designed to return General Motors Europe to profitability.

The massive restructuring plan will involve additional investment to improve productivity at Opel's Russelsheim plant, although capacity across Europe will be reduced by some 400,000 units annually. Around 1,500 jobs could go at Luton as part of a 5,000 total reduction in GM's headcount across Europe.

Vauxhall insisted the decision was in no way connected with uncertainty over Britain's future membership of the European single currency, despite chief executive Nick Reilly's open support for EMU. Reilly has publicly appealed to the Government to join the single currency on at least four occasions in the last two years. Last February, Reilly said: 'Being outside the Euro is costing us a lot of money in terms of transaction costs, hedging costs and the uncertainty about where the exchange rate is going. That's a penalty we in Britain are having to face and our European counterparts are not and that's putting us at a disadvantage.'

GM blamed declining upper medium car sales across Europe - including in the UK fleet market for forcing such a radical restructuring of its operations. Vauxhall will transform its Luton plant into a base for commercial vehicles and off-road models.

Ian Coomber, executive director sales, marketing and customer care, said the Luton plant had been a victim of declining upper medium sector sales across Europe and denied the decision was connected with either the strength of Sterling or Britain's decision not to join the Euro at present.

'The upper medium sector is under a lot of pressure across Europe and we have one plant too many,' said Coomber. 'Vectra sales have been slipping, but the whole sector has been contracting. Vectra has not been a failure - it is the number one car in its sector in the UK market.

The decision is a 'bolt from the blue' with Luton thought by many as one of the UK's 'safest' car plants with most people expecting the Luton factory to retain its status as the 'lead' plant for the Vectra replacement.

Vauxhall chairman and managing director Nick Reilly said: 'While Vauxhall continues its successful sales and market share growth of the past two years in the domestic market, these moves on the manufacturing side of our business are necessary to retain competitive manufacturing resource in the UK and allow us to optimise the utilisation of our assets.'

General Motors Europe president Mike Burns said: 'The restructuring plan is far-reaching, but essential for bringing the company back to profitable growth. The reduced cost base, combined with our aggressive new vehicle portfolio focus, will ultimately provide the best guarantee for our future success.'

  • VAUXHALL'S Vectra replacement due to enter showrooms in spring 2002 following a likely unveiling at next September's Frankfurt International Motor Show will be called Epsilon. While the Vectra name will be retained for continental Europe, Vauxhall sources have indicated that Epsilon - the codename for the new car - looks set to be adopted as the official name for the UK market.

    In making the European restructuring announcement General Motors said that Vauxhall and Opel were re-evaluating their future vehicle portfolio in a bid to deliver 'more innovative, segment-defining product entries'. Plans for an Omega V8 - which was not destined for the UK - have been axed and the company says Saab will, over the next five years, 'considerably enlarge its product offering'. Further cost savings will result from the company's recent alliance with Fiat.

  • Further comment and analysis in Friday's edition of Fleet News