General Motors announces Europe-wide restructuring plans

In February 2010, the Chief Executive Officer of General Motors Europe, Nick Reilly, announced a five-year plan that aims to reinvigorate 80% of Opel/Vauxhall carlines and place a strong emphasis on alternative solutions. The business plan also foresees the elimination of about 8,300 jobs. This includes the intent to sell or close the Opel production facility in Antwerp, Belgium, a move which trade unions and the European works council have strongly opposed.

Management announces viability plan

In order to guarantee a return to long-term profitability, on 9 February 2010 General Motors Europe (GME) announced a five-year business plan. The so-called ‘viability plan’ includes innovation and restructuring processes at the European subsidiaries of General Motors (GM), Opel and Vauxhall. In particular, the plan envisions that 80% of the Opel and Vauxhall carlines will be at an age of three years or less by 2012. This includes the launch of 12 new models by 2011. In addition, Opel/Vauxhall will spend €1 billion in innovative and fuel-efficient powertrain technology as it introduces a range of new green products.

The viability plan requires long-term funding of €3.3 billion to run the business during the transformation. In total, the company plans to invest about €11 billion over the next five years. As part of the €3.3 billion funding requirements, the GM parent company will contribute €1.9 billion to the new Opel/Vauxhall business. The company will continue to work with European governments to secure funding of about €2 billion through loans or loan guarantees. Opel/Vauxhall is also negotiating with trade unions on securing €265 million in annual savings from workers.

Major restructuring to include job losses throughout Europe

The business plan foresees that Opel/Vauxhall will break even by 2011 and be profitable by 2012. Economic forecasts predict that 13.4 million cars will be sold in western Europe in 2010, corresponding to a reduction of more than 20% compared with 2007. GME’s viability plan is based on the assumption that the market will not come back to the levels seen earlier in this century for some time.

To adjust to the current and forecast market environment, Opel/Vauxhall will reduce its capacity by about 20%. According to GM, this requires a job level reduction of some 8,300 jobs. This reduction will be spread across most of Europe and includes 1,300 employees in sales and administration and 7,000 jobs in manufacturing. The planned job cuts also include the closure of the Opel production facility in Antwerp in western Belgium. The restructuring processes will, however, affect all of the European sites. In addition to Belgium, the group has plants in Austria, Germany, Hungary, Poland, Spain and the United Kingdom (UK). Besides 2,600 job losses in Belgium, Opel’s four plants in Germany will cut a total of 3,900 jobs, while Spain is likely to lose 900 jobs and the UK about 500 jobs.

No allocation of alternative production to Antwerp plant

The Antwerp plant manufactured 9% of Opel’s 1.48 million vehicles in 2008. Its production of the Astra model totalled 88,900 vehicles in 2009, a 33% decline compared with 2008 and less than half of the 196,300 cars made there in 2007. Opel also manufactures the Astra model in Bochum in western Germany and Gliwice in southern Poland, as well as a right-hand drive version at Vauxhall’s plant in Ellesmere Port in western England.

From the outset, European trade unions had opposed the plan to shut down the Antwerp plant and demanded alternatives to the production of the Astra model. The European Metalworkers’ Federation (EMF) points to the fact that a joint working group composed of management and employee representatives, set up by GME’s Chief Executive Officer (CEO), Nick Reilly, managed to devise a positive business case for Antwerp with the allocation of small sports utility vehicle (SUV) products.

The allocation of small SUV models to the Antwerp plant in exchange for the production of the Astra model as well as the reduction of labour costs were in fact part of the so-called Delta Framework Agreement (EU0610029I, EU0706019I, EU0804039I). Therefore, EMF and GME’s European works council – known as the European Employee Forum (EEF) – contend that the Antwerp workers have made significant sacrifices since 2007, in the region of €20 million a year, to fulfil the contract from the labour side.

However, the European management stated that ‘even in the case of a positive business case for SUV production at Antwerp, the intention to close the plant does not change…’. The EEF called the planned closure a ‘one-sided and economically unreasonable approach’. In the view of the EEF, the management’s decision corresponds to a breach of the Delta Framework Agreement. The President of the EEF, Klaus Franz, pointed out that everyone was concerned by the termination of the European collective agreement. Mr Reilly, on the contrary, reaffirmed his belief that GM had never signed a legally binding agreement to build a subcompact SUV at the Flemish plant. He insisted: ‘It was not a commitment, it was a plan.’ GM now plans to build the SUV, which will be sold under the Opel and Chevrolet brands, at its Daewoo unit in South Korea. The idea of having two separate manufacturing sites for the same model, each with their own tooling and equipment costs, ‘no longer makes any sense at all’, Mr Reilly added.

Negotiations on sale or closure of Antwerp plant

After further negotiations, in April 2010, GM and the trade unions reached a draft agreement on the sale or closure of the Antwerp plant. On 18 April 2010, GME’s Belgian trade unions agreed to put a buy-out plan to vote. The social plan, which the trade unions agreed to put to their membership, is a mix of early retirement packages for workers aged 50 years and over, along with individual pay-outs that could reach as much as €144,000, depending on seniority, pay and age. At least 1,250 employees, predominantly staff who accepted voluntary retrenchments, are set to leave at the end of June.

Should the majority of Opel’s Antwerp employees accept the social plan, a so-called ‘conversion group’ will launch a search for investors for the factory. They have until the end of September to find a new owner. If not, the factory will have no option but to close at the end of December. Spurred by the Flemish government, the conversion group is actively involved in a search for solutions in Asia, which is the most likely region in which to find a takeover candidate. South Korean, Japanese and possibly Indian manufacturers are the only realistic contenders to take over a car factory in Europe at this stage, it is believed. If it fails to find an investor by September, the factory will be closed and the remaining workers given the same buy-out terms as their colleagues.

Negotiations on labour cost savings

When announcing in January 2010 that Opel Antwerp would close at the end of June, GME prompted trade unions and the EEF to suspend negotiations over the carmaker’s proposal to secure €265 million in annual wage cuts over the next five years. The parties are expected to resume negotiations once the Antwerp plant’s future is resolved.

The EEF had been pushing for an equity stake of between 5% and 10% and a say in further factory closures and job cuts in exchange for the cost savings. However, its Detroit-based management has lost interest in the idea of an equity stake. GM is now discussing a scheme that would see the cost savings linked to investment guarantees made by the US carmaker.

Commentary

The closure of the Antwerp plant is GME’s first significant move to reorganise Opel and its sister UK brand Vauxhall since withdrawing from a deal in November 2009 to sell a majority stake in the division to a group led by Canadian auto-parts maker Magna (EU0910029I).

The Vice-president of the EEF, Rudi Kennes, stated that the management’s plans, including the search for an investor, were a sign of progress – although the plant needed longer than six months to find an investor and the job cuts were more than the 1,000 maximum that trade unions had been willing to accept. Mr Kennes commented: ‘If Mr Reilly is moving in the right direction, we can find a common solution.’ He added: ‘The only thing is it has to be a solution with, not against the unions ... This can be used as a basis for negotiations.’

With regard to the viability plan, Mr Reilly outlined:

We are extremely pleased that we now have independent confirmation that our plan is sound and will place Opel and Vauxhall on the road to sustainable, long-term profitability. We now have a road map, we know where we are headed and we are working with all our partners so we can switch into high gear for a successful future.

Volker Telljohann, IRES Emilia-Romagna, Bologna