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Opel to submit plant closure plan to board: sources

By Christiaan Hetzner and Ben Klayman

FRANKFURT/DETROIT (Reuters) - General Motors' Opel managers will present a business plan next Wednesday to the unit's board that likely will involve closing two plants in Europe to reduce manufacturing capacity by some 30 percent, people familiar with the company's thinking said on Thursday.

"GM has been saying repeatedly that, with excess capacity equivalent to 500,000 cars annually, we have two plants too many and the new head of manufacturing has been visiting one site after the other, playing them off against each other," said one supervisory board member from the Labor side, who asked not to be identified.

"We know the main points of the business plan that may be presented on Wednesday, and it foresees plant closures and no growth of the company," the board member added. "If it's put to a vote, then the entire Labor bloc will vote against this plan."

A GM spokesman declined to comment on talk of closing plants, but repeated the U.S. automaker's previous statement that executives are working closely with the unions and works council to improve profits.

A person at the company said no decision had been taken on closing plants in Europe, but added management's room for compromise was increasingly limited by extremely harsh market conditions on the continent.

"Business in Europe is pretty dire for the industry overall at the moment and there's no end in sight," the company source said. "When it's this bad you have to take action, so it's not so much what we want or what the unions want - it's the environment that is driving this.

"It doesn't allow much more time to lose."

Employee delegates cannot block any decision by senior GM executives sitting on Opel's board, since they lack the majority.

But they warn that should GM executives approve any such plan from Opel's management on Wednesday, it would ruin efforts to find common ground and turn stalled negotiations into outright war.

GM's plants in Germany's Bochum and Ellesmere Port in the UK remain the most threatened, although Opel Chief Executive Karl-Friedrich Stracke said this month he would honor an agreement not to shut any sites through the end of 2014.

GM Chief Executive Dan Akerson has grown increasingly impatient with the chronic losses in Europe, including $747 million last year. He said earlier this month that it may take two years before the division shows a profit again.

CORSA PRODUCTION CUT

Ellesmere Port's Labor leader argued that closing the company's last remaining car plant in the UK could severely risk sales in that market by leaving Opel's sister badge Vauxhall, the only English car brand, without any local production.

"There's no real attempt to open a dialogue over the opportunity to build where we sell - like manufacturing the Chevrolets that are imported into Europe - things that we think will avoid plant closures," said John Fetherston, referring to labor's preferred solution for unused factory capacity.

Closing a plant can be quite expensive, with estimates ranging as high as 500 million euros depending on how generous severance packages are. Often times, veteran workers can be offered as much as 100,000 euros just to leave the company.

Akerson has said the European auto industry has seven to 10 too many plants, so a closure by GM could pressure new alliance partner PSA Peugeot Citroen to do the same.

On Thursday, GM and Peugeot said work will begin by year end on projects designed to eventually reap at least $2 billion in savings, and each company named five executives to the alliance's combined steering committee.

Opel sales in Europe have tumbled by a fifth in the first two months of this year - worse than the 18 percent decline at the Fiat and Peugeot brands but better than the 28 percent plunge at Renault .

Opel's two plants building the Corsa subcompact, a segment particularly dependent on demand in austerity-hit southern European markets, have both been cutting production.

Normally assembly line employees in the Eisenach plant in Germany work 38-hour weeks, but this has been cut to as little as 30 hours. The Spanish sister site in Zaragoza has also been telling some of its employees to stay home as company sources say its capacity utilization is set to drop below 70 percent this year.

(Additional reporting by Deepa Seetharaman in Detroit; Editing by Tim Dobbyn)

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