General Motors ditches plan to sell Opel and Vauxhall to Magna

After months of negotiations, on 3 November 2009 General Motors abandoned the plan to sell its European subsidiaries to the consortium composed of the Canadian-based automotive supplier Magna International and Russia’s Sberbank. At this point, the European Metalworkers’ Federation insists that General Motors should enter into talks with the European Works Council and the European trade unions without delay.

The European subsidiaries of General Motors (GM) – Opel and Vauxhall with factories in Belgium, Germany, Poland, Spain and the United Kingdom (UK) – have been on the verge of financial collapse since GM declared bankruptcy in June 2009. After weeks of negotiations between various interested parties, including potential investors as well as the German government, in September the decision was made to sell Opel and Vauxhall to the consortium composed of the Canadian-Austrian car parts supplier Magna International and Russia’s Sberbank. However, on 3 November 2009, GM’s board of directors abandoned the results of these negotiations. It announced that, due to the importance of Opel and Vauxhall to GM’s global strategy, it had decided to retain its European subsidiaries and to initiate a restructuring of its European operations.

Investigation on application of EU competition rules

After Germany had agreed to provide some €4.5 billion in financial aid for the Magna deal, GM announced it would sell Opel to the Magna consortium in September. However, the financial support guaranteed by the German state had been subject of an EU investigation into whether the funds were linked to the maintenance of jobs in Germany ahead of other European countries hosting Opel or Vauxhall plants. At the end of a process carried out with scrutiny, the EU’s Competition Commissioner, Neelie Kroes, stated that ‘GM and the Opel Trust should be given the opportunity to reconsider the outcome of the bidding process’. According to analysts, the EU investigation, as well as the delay that it has caused, might have contributed to GM’s change of mind.

GM’s restructuring plan

According to the GM Chief Executive, Fritz Henderson, the sale to Magna was ‘no longer in the best interests of GM, now that the environment for car sales has started to improve’. He explained that government-backed scrapping bonuses have, in fact, supported sales throughout Europe and the United States (US).

Another reason for GM to keeping Opel relates to the intellectual property that resides in its European plants. Opel is considered as the heart of GM’s research and development expertise for small and compact size cars, which are the models that will play a crucial role in every carmaker’s strategy in the coming years.

GM announced that it will soon present its restructuring plan to the governments and trade unions in the European countries involved. The US carmaker might go back to a ‘viability plan’ for Opel, developed at the beginning of 2009 to prevent the carmaker from becoming insolvent. Under this plan, GM aims to reduce Opel’s fixed costs by 30% and to cut about 10,000 of the overall 50,000 European jobs.

According to GM, its plan is similar but not identical to that presented by Magna, which had called for the elimination of 10,500 jobs across Opel’s and Vauxhall’s European plants. Magna, however, would have kept open the four manufacturing plants in the western German cities of Rüsselsheim, Bochum and Kaiserslautern and in the eastern German town of Eisenach, whereas GM intends to close the least efficient plants. This puts Bochum in North Rhine-Westphalia and Eisenach in Thuringia, employing 5,200 and 1,800 people respectively, back into jeopardy. GM’s ‘viability plan’ would also see the closure of the Antwerp plant in the north of Belgium.

Trade union response

While the German trade union leaders were particularly outraged by GM’s unexpected U-turn, the British trade unions have been more welcoming of GM’s decision. They believe that the two UK factories in the northwestern town of Ellesmere Port and the northeastern city of Luton stood a better chance of survival than under the Magna–Sberbank consortium.

In Germany, on 5 November 2009 about 10,000 Opel workers walked out in protest against the decision. At a rally close to the Opel headquarters in Rüsselsheim, the Head of Opel’s company works council, Klaus Franz, rescinded hundreds of millions of euro in cost concessions that workers agreed to on condition that Opel was bought by the Magna–Sberbank consortium. Furthermore, Mr Franz emphasised that workers would not go along with GM’s blackmailing of European governments and staff. He also said that he wanted to see Opel, which is currently a limited liability company, turned into a joint stock company. ‘We do not want to be an appendage ruled by Detroit’, Mr Franz highlighted, accusing GM of mismanagement, while ignoring the interests of European customers.

Apart from the protests in Bochum, Eisenach, Kaiserslautern and Rüsselsheim in Germany, on 6 November another protest was held at the Antwerp plant in Belgium.

Commentary

The European Metalworkers’ Federation (EMF) insists that GM management should enter into talks with the company’s European Works Council – known as the European Employees’ Forum (EEF) – and the European trade unions without delay. The EMF General Secretary, Peter Scherrer, underlined that any new restructuring plans from GM must include the two major EMF demands: no plant closures and no forced redundancies in Europe. Similar to former restructuring processes at General Motors Europe (EU0610029I, EU0706019I, EU0804039I), EMF’s approach is characterised by a close cross-border trade union cooperation with the aim of developing a shared strategy at European level.

Against this background, Mr Henderson acknowledged that the recent upheavals at Opel had strained relations with the trade unions, conceding that: ‘We have some fence-mending and repair that needs to be done’.

Volker Telljohann, IRES Emilia-Romagna

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