Opel, European unions agree on restructuring plan

21st May 2010, Comments 0 comments

General Motors' European unit Opel marked an important step Friday by getting unions to agree on terms of a long-awaited restructuring plan, knocking the ball back into Berlin's court with GM hoping for loan guarantees in return.

Opel staff agreed to reduce annual costs by 265 million euros (333 million dollars) per year through salary freezes and the elimination of bonuses, and accepted a plan that includes the elimination of 8,300 positions from a total of nearly 50,000 across Europe.

The agreement, which must still be formally approved by unions, includes a proviso that Opel must launch a series of new models to benefit from the savings in personnel costs.

In exchange, staff will also share in future Opel profits, though details of that measure have yet to be finalised.

GM plans to spend 1.9 billion euros (2.4 billion dollars) to restructure Opel and its British sister brand Vauxhall, and has asked European countries where plants are located to contribute 1.8 billion euros in public guarantees.

The US automaker hopes the agreement announced on Friday will help overcome resistence from Berlin, which has not yet agreed to its share of the guarantees, more than one billion euros.

Around 3,900 job cuts are expected in Opel's home country, where around half of all staff work.

"We have fulfilled all conditions" posed by the German government, GM Europe chief executive Nick Reilly said during a press conference with Klaus Franz, head of the GM works committee.

Opel has tried for months to reach an agreement with workers, a pre-condition for German guarantees that the carmaker needs to borrow money.

The carmaker has found a consortium of banks that are ready to grant it the necessary credit.

"We are confident enough in the future to invest more than a billion euros (by 2014 in Opel) and are asking governments to make the requested aid available," Franz said in reference to the sum of 265 million euros multiplied by the four years covered by the restructuring plan.

A government committee is to render its opinion concerning the public aid next week and Reilly said: "We hope to have a positive response as soon as possible."

Members of the ruling coalition in Berlin have asked however if the US car maker could not cover restructuring costs on its own, and the government maintains that the question of granting state aid "remains open."

German lawmakers point to GM's announcement on Monday that it had made a profit in the first quarter for the first time in more than three years.

"Frankly, it needs the money" from Germany, Reilly said in reference to Opel.

He pointed out that GM has turned itself around with funds provided by US taxpayers that cannot be used to save its European subsidiary.

Berlin is concerned meanwhile that European funds will be siphoned off by the US parent company, a fear that Franz said was unjustified.

He said that the investment made by workers was "the guarantee that the money would not disappear somewhere in the vast world of GM."

In addition, "it is not a question of making public funds available but of granting a guarantee," Franz added.

The Opel saga has dragged on since November 2008, when the company first asked for help, before GM decided to sell it to the Canadian group Magna and the Russian bank Sberbank.

After pulling out of bankruptcy in November, GM did an abrupt U-turn however and decided to restructure Opel itself.

© 2010 AFP

0 Comments To This Article