LISBON, Portugal (AP) - The General Motors car factory in Portugal will close Oct. 31 unless the government can find a way for the unit to be more cost effective, GM's director for Europe said in a letter, according to a Friday newspaper report.
Gerald Johnson said in the letter, reportedly sent to union representatives, that GM had delayed its decision to close the factory because the Portuguese government had asked for time to find a solution for making the Combo production unit more profitable, the newspaper said.
''If a viable solution isn't found, GM still plans to transfer Combo's production from October 31,'' Jornal de Noticias quoted the letter as saying. ''We therefore think it's prudent that talks with workers' representatives are initiated to work out a fair and responsible compensation program for the employees.''
GM said last month that it costs $632 more to make a car at the Portuguese plant than at other European plants.
The company reportedly wanted to move production of its Combo vehicle to a plant in Zaragoza, Spain. GM employs 64,500 people in Europe, with 1,200 at the Portuguese factory and another 800 in administration in the country.
GM Portugal's spokesman Nelson Silveira said negotiations about the plant's future were ongoing. ''We don't have a decision yet, and we don't know when one will be reached.''
Silveira confirmed Jornal de Noticias reports, but could not provide the letter, which he said was an internal company communique.
Portuguese Economy Minister Manuel Pinho said Thursday that the government was negotiating with GM, and was willing to create the best conditions for car makers in Portugal.
Pinho also told a parliamentary session that GM would have to pay a settlement if it closed the plant before the end of its contract in 2009.
''If the Portuguese state grants incentives, and the counterpart does not fulfill its end of the deal, then it has to give the money back,'' Pinho said, without saying how much could be due.
Workers in Portugal and Germany walked out of plants earlier this month in protest after reports that the troubled company might cut jobs in Western Europe.