German Car Sector at Crunch Point

Germany's car industry this week faces an historic turning point, with the supervisory board of Opel meeting in crisis session to discuss reported plans by owner General Motors to cut 10,000 jobs in its loss-making European operations and Volkswagen at the centre of a legal battle between Brussels and Berlin.

Losses at GM Europe, which owns Saab in Sweden and Vauxhall in the UK, are likely to surpass last year's $286m (£159m) and to approach $500m. This comes as the flat German economy and unemployment continue to depress consumer sentiment in the European mainland's biggest car market and have brought a further cost-cutting review under Fritz Henderson, its chairman.

With Wolfgang Clement, the federal economics minister, in talks with Opel over planned job cuts at the main Rüsselsheim plant near Frankfurt - now at half capacity - there are parallel fears in Sweden that the Saab plant at Trollhättan could be closed and production of a new model this decade switched to Germany.

GM has dismissed the rumours of 10,000 job cuts in its 62,000-strong workforce ahead of the announcement, next month, of its latest rescue plan for its European operation. But senior sources have indicated that the Saab plant, which produces 140,000 units, is vulnerable to closure and there will be sweeping redundancies in Germany. Vauxhall's Ellesmere Port plant is deemed relatively safe.

Mr Henderson, who plans a new Vectra and Saab using the same basic "platform" before 2009, has said the decision on which plant to use will be made next year but he is determined to end almost five years of losses. "Some of our competitors have found a way to be profitable and we haven't; there's no excuse," he said last month.

The problems at GM coincide with difficulties at VW, which last week appointed a former DaimlerChrysler executive, Wolfgang Bernhard, a renowned cost-cutter, as the future head of its Volkswagen brand. VW is negotiating with unions about a two-year pay freeze as part of its plans to cut costs by 30%.