Loss-making Opel under threat

2012-03-28 12:43

Frankfurt - The board of European carmaker Opel met on Wednesday under pressure from US parent General Motors to put an end to years of steep losses, with thousands of workers in Germany and Britain fearing the closure of their plants.

The 20-person board, which includes United Auto Workers boss Bob King for the very first time, was scheduled to begin meeting at Opel’s headquarters in Ruesselsheim at around 09:00 GMT.

The gathering was expected to last into the late afternoon. It was unclear whether management would submit a mid-term business plan, which would include plant closures, or focus on less sensitive issues such as the appointment of a new sales chief.

“All signs point towards escalation regardless,” said one source close to the board, who said plant closures would be the elephant in the room even if they weren’t discussed.
GM chief executive Dan Akerson and Opel chairperson Steve Girsky are pushing Opel CEO Karl-Friedrich Stracke to lower the company’s breakeven point by shifting production from high wage countries in western Europe to emerging markets.

Though Opel has said no plants will go before the end of 2014, most expect the 50-year-old factory at Bochum in western Germany will be earmarked for closure, along with one at Ellesmere Port, the company’s only remaining car plant in the UK, where the brand is known as Vauxhall.

“We’re not going to start trembling with fear just because everyone is saying Bochum will be closed,” said one source close to Bochum’s labour leaders, who was not authorised to speak to the press.

“GM won’t announce any plant closure today anyway, since they’d be crazy to give up their trump card. The moment they say which plants are safe, they can no longer play them off against each other in the hopes of extracting concessions.”

Economic weakness has hit car sales in Europe, forcing makers to confront high fixed costs and a capacity overhang in the sector that GM chief executive Dan Akerson says equates to up to 10 plants.

Opel’s own Antwerp plant, Fiat’s woefully uneconomical Sicilian plant, and the Trollhattan factory of insolvent carmaker Saab were shut down in recent years, while Mitsubishi is ending car production in its Netherlands facility by year-end.

But Europe still has around 240 plants in 27 countries and political resistance to plant closures has been strong.

In the United States, Detroit’s big three automakers - GM, Ford and Chrysler, now partnered with Fiat - closed 13 plants between 2008 and 2012.

Implications for Peugeot

The works council in Bochum, where the Opel plant employs about 3 100 workers building the Zafira MPV, said a closure would cost 45 000 jobs in total when related services companies and suppliers are added in.

“Opel Bochum’s employees are rightly asking themselves, ’What happens after 2014?’ Plant closures have not been taken off the negotiating table, just the opposite,” a statement from the plant’s works council said on Tuesday.

Detlef Holzhauer, a teacher from a school in Bochum who visited the plant with his class on Tuesday, said he had witnessed a steady erosion of jobs over a span of decades.

“We’ve been doing this since 1979, when Bochum still had 16 000 employees. It’s certainly been depressing to witness the whole demise,” he said.

Ellesemere Port employs about 2 100 plus 700 contractors.

Auto analysts expect a wave of plant closures across the continent at other beleaguered carmakers, such as PSA Peugeot Citroen, Renault and Fiat.

Action taken by Opel could be of particular significance for workers at Peugeot, which has agreed a cooperation deal with GM that is predicated upon each restructuring their European operations and sharing platforms to cut costs.

Analysts estimate that Peugeot has an even greater need to close down factories than Opel, in part because GM already reduced its fixed costs by 20% during 2010 and 2011 with the closure of the Antwerp plant and downsizing elsewhere.

Separately, the Opel board is expected to approve Alfred Rieck as new sales chief starting in July, replacing Alain Visser, who accepted a new position in Chevrolet’s global marketing department.

Until then Bill Parfitt, the former Vauxhall chief, is expected to serve as interim head of sales.