GME Expects ‘Significant’ Materials Cost Penalty

GENEVA – High raw material prices will continue to nag European auto makers in a region where sales are expected to be flat in 2005, a General Motors Corp. executive says.

“Commodity cost increases are a significant issue for the industry, whether it’s steel or petrochemicals,” GM Europe Chairman Fritz Henderson tells journalists here at the Geneva auto show. “We’ll deal with it, just like our competitors will. We’ll deal with it the way we’ve always dealt with it.”

Henderson talks to reporters at Geneva show.

High prices for steel and plastics can add hundreds of euros to the cost of making a vehicle. Rising material expenses are one of many factors – along with negative pricing and sluggish sales in important European markets – that can have an unfavorable effect on GM Europe’s latest restructuring efforts.

GME has lost money each of the past five years and is projecting losses of $500 million in 2005.

Last fall, GME announced plans to cut 12,000 jobs. Henderson says he is satisfied with the reorganization’s progress. “We’re pretty much on track with what we want to get accomplished,” he says. “There is awfully good work done, particularly in Germany, but also across Europe. So I’d say we’re on track.”

[email protected]