US recall and European closure deal a double whammy to GM profits

General Motors is facing yet more drain on its profits and cash reserves as it deals with the fallout of the massive ignition-switch recall in the US and now faces into the expensive prospect of shuttering the Bochum Opel factory in Germany.

Costs associated with the vast recall of Chevrolet Cobalt and Pontiac G8 models over a fault that disabled the airbags (and which has allegedly led to as many as 13 deaths in road traffic collisions) have so far drained GM's coffers to the tune of around $1.3 billion (€900m). That figure has annihilated GM's quarterly profits, which tumbled from $1.18bn (€861m) this time last year to just $212m (€154m) this year.

And the pain is not over yet, as General Motors in Europe now faces the unenviable task of closing down the ailing Bochum factory in Germany, as it seeks to stem losses from Opel. The factory currently makes the Zafira MPV, production of which will be transferred to Opel's HQ factory in Russelsheim, near Frankfurt, with the loss of around 3,300 jobs in Bochum, which lies in the Ruhr valley, near the larger cities of Dortmund and Essen.

The cost of closing the factory is estimated to be around $820m (€598m), which includes a reported $753m (€550m) in severance payments and early retirement packages. Opel is refusing to comment on speculation about the costs, merely noting that the amount has already been agreed and that the company intends to return to profit in Europe by 2016.