FRANKFURT—General Motors Co.'s Opel unit is paring back the hours of German factory workers in a move aimed at blunting the impact of Brexit and breaking even in Europe for the first time in nearly two decades.

GM is scaling back work at two Opel assembly plants in Germany that make models popular in the U.K. Auto makers have said the U.K.'s decision to leave the European Union could result in currency headwinds and weaker British demand for light vehicles, potentially slowing momentum in Europe's healthy auto market

The Detroit auto maker's European unit had been on track to end a long streak of financial losses in the region before the Brexit vote. Last month, however, GM executives have said softer vehicle sales and the negative effect of a weaker British pound could result in a $400 million hit in the second half of the year, endangering the break-even goal.

GM Chief Financial Officer Chuck Stevens told analysts last month that all options are on the table to soften Brexit's blow, including cutting manufacturing and material costs, or potential price increases.

A spokesman confirmed Opel's reduction Friday but wouldn't say how many employees are affected and how long the action is expected to last. Workers will be put on short-time work, a German system used across sectors in which workers' hours are cut for a limited period to prevent job losses.

Commerzbank analyst Sascha Gommel said short time is a useful tool for German employers, which are prevented by national labor laws from laying off workers to adjust for declining demand. Germany's Volkswagen AG is also currently using short-time work due to a supplier dispute that has disrupted some production.

Sales at Opel—GM's main brand in Europe—have rebounded as a result of a turnaround effort led by the division's chief executive, Karl-Thomas Neumann. Appointed in early 2013, the former Volkswagen executive launched a marketing blitz to revitalize Opel's faded image and introduced a string of fresh vehicles, including an Astra small car that received Europe's Car of the Year award in February.

GM last month reported a second-quarter operating profit of $137 million in Europe, its first quarter in the black since 2011.

Ford Motor Co. reversed losses in Europe recently amid stronger sales in the wider market, but is forecasting a negative financial impact related to Brexit of about $200 million this year and $400 million to $500 million in each of the next two years.

GM considered selling its loss-making Opel unit amid its 2009 bankruptcy restructuring but pulled the plug on that idea in favor of restructuring. GM Europe has racked up more than $15 billion in losses since 1999. It pulled the Chevrolet brand out of Europe in late 2013, signaling its confidence in Opel's future.

The U.K. is the biggest market for two of Opel's most popular vehicles—the Corsa small car, built in Eisenbach, Germany, and the Insignia midsize car, assembled at a plant in Opel's headquarters in Russelsheim, Germany. They are sold under Opel's sister brand in the U.K., Vauxhall.

Write to Natascha Divac at natascha.divac@wsj.com

 

(END) Dow Jones Newswires

August 19, 2016 15:55 ET (19:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more General Motors Charts.
General Motors (NYSE:GM)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more General Motors Charts.