Agreement on restructuring and cost-cutting at GM Germany

In December 2004, the management and European Works Council at General Motors Europe concluded a European framework agreement on restructuring and cost-cutting, involving the loss of about 12,000 jobs at the auto company's European sites. Some 9,500 of these jobs will be cut at the German sites of Adam Opel AG - the German subsidiary of GM. As part of the overall settlement, an agreement was reached between Opel's management and company works council, which aims to avoid compulsory redundancies by way of early retirement schemes, outsourcing and the voluntary transfer of some 6,500 employees to so-called transfer agencies. The agreement is only the first step in the company's restructuring process. Several issues remain to be negotiated in the coming months, such as the future of the production sites and decisions about where future models are to be produced.

On 8 December 2004, management representatives of General Motors Europe (GME) and the GM European Employee Forum (EEF) - ie the company's European Works Council - signed a European framework agreement on restructuring and cost-cutting- a process which will mean around 12,000 jobs being lost at the motor-manufacturing company’s European sites. The US-based General Motors (GM) had declared that it was imperative to implement these job cuts against the background of considerable losses incurred by its European subsidiaries. A cost-cutting programme resulting in savings of at least EUR 500 million a year by 2006 had to implemented in order to improve GM’s competitiveness in the European car market.

Part of the overall settlement is a partial agreement on restructuring at the western German sites of Adam Opel AG- the German subsidiary of GM. This deal was agreed on 8 October 2004 between the company works council of Opel and management. Some 9,500 of the 12,000 jobs to be cut at GME are in western Germany, bringing the number of Opel workers in Germany down to 22,000. About 5,000 jobs will be cut at the site in Rüsselsheim, about 4,000 in Bochum and several hundred in Kaiserslautern. Opel's eastern German production in Eisenach, a wholly owned subsidiary of GME, will not be affected.

Main points of Opel agreement

The German agreement, which has not yet been published in detail, aims at reducing the workforce without forced redundancies but by way of early and partial retirement schemes, outsourcing, asking employees to go to work for future joint-ventures with Opel suppliers and, most importantly, by the voluntary transfer of some 6,500 workers to a so-called transfer agency (Beschäftigungsgesellschaft).

In these transfer agencies the workers can receive further training for a period of up to 12 months in order to facilitate placing them in new jobs. Under the Opel agreement, employees who are transferred to these agencies receive 100% of their former wage during their period of notice, which varies according to their length of employment. During the remaining months they receive 85% of their former net wage. These payments are composed of a so-called transfer short-time allowance equivalent to 60% (67% for recipients with children) of former income, which is paid by the Federal Employment Agency (Bundesagentur für Arbeit) and a top-up payment guaranteed by Opel. If the employees cannot be placed in new jobs within 12 months, they will then enter unemployment with entitlement to unemployment benefits.

As an incentive to leaving the company voluntarily or entering a transfer agency, the agreement provides compensation payments, related to the last wage and graduated according to the employee's length of service and age. According to the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall), the level of these compensation payments will be well above what is usually paid in such cases in the industry. According to a calculation which was presented together with the agreement, a worker aged 50, with 30 years of employment at Opel and currently earning EUR 3,600 a month, would be entitled to a compensation payment of about EUR 216,000 (before tax). Many workers, however, will only be entitled to lower payments but as the average length of service at, for example, the Opel plant in Bochum is about 20 years, many employees might be entitled to compensation of more than EUR 100,000.

However, it has also been agreed that, in the event that not enough employees are prepared to accept leaving Opel, an establishment-level arbitration committee (Einigungsstelle) will be established to decide on how to manage the agreed job cuts.

The agreement is understood to be only the first step in the company's restructuring process. Issues such as the future of the production sites and decisions about where future models will be produced are to be negotiated in the coming months. GM has so far not been prepared to sign any kind of guarantee that no European sites will be closed. In Germany, Opel has demanded further concessions from the company works council concerning the reduction of wages and more flexible and longer working time. The company works council seems to be prepared to negotiate these issues in return for a guarantee on maintaining the remaining employment level at all Opel sites in the forthcoming years.

Background

The agreement follows several months of negotiations which started after GME's announcement on 14 October 2004 that it was to cut 12,000 jobs in Europe. This announcement immediately met with a call for a European day of action on the part of GM workers by the European Metalworkers' Federation (EMF) and the GM European Works Council. On 19 October, tens of thousands of GM workers participated in meetings and protests across Europe, staged to express their opposition to the company's plans (EU0411201N). The countries involved included Belgium, Germany, Poland, Spain, Sweden and the UK. In addition, the action was supported by workers in Brazil, who also agreed to stop any extra production that could be exported to Europe and harm the Europe-wide workers’ action.

The day of action highlighted the unions’ decision to meet the restructuring of GME with cross-border cooperation, which had been expressed on 1 October 2004 in the Copenhagen declaration. The five central demands behind the day of action were:

  • no plant closures;
  • no forced redundancies;
  • a sustainable European brand and sales offensive to be developed and implemented by 'properly qualified management';
  • the establishment of requirements and future perspectives for the Opel, Vauxhall and Saab brands; and
  • no violation of collective agreements.

The most high-profile sign of resistance to the company’s plans was given by the workers of the Opel plant at Bochum, in northwest Germany, who stopped production for six days with the effect that other plants in Germany, Belgium and the UK also had to slow down production due to missing parts from Bochum.

The new Opel agreement follows a so-called employment pact concluded in 1993 and a 1998 site agreement (DE9802247F) concluded at Opel in order to avoid forced redundancies.

The new agreement was reportedly received by employees with caution and received some criticism - especially in the Bochum plant - but to date no further walk-outs or stoppages have occurred.

Views of bargaining parties

The Opel management and company works council jointly presented the outcome of the negotiations. Hans Demant, Opel's managing director, welcomed the agreement, saying that it would help to restore Opel’s competitiveness in the car market. The head of the German company works council, Klaus Franz, who also chairs the GM EEF, commented that the most important aim of all works councillors - avoiding forced redundancies - had been achieved and that to cut employment by way of transfer agencies is the better alternative.

The president of the German Association of the Automotive Industry (Verband der Automobilindustrie, VDA), Bernd Gottschalk, was cited in the press as welcoming the outcome and expressing his hopes that this would help to increase Opel’s competitiveness.

In a joint statement by the GM EEF and EMF, the outcome of the negotiations was described as a 'victory for reason'. In this declaration, the general secretary of EMF, Reinhard Kuhlmann, stated that the GM European framework agreement would be a 'significant step forward to create a European negotiation space' adding, however, that 'all this exercise is defensive and not really safeguarding manufacturing jobs in the car industry in Europe'.

Commentary

Following the settlement at Opel it remains to be seen how this agreement will be implemented and how many employees will either move to new joint ventures or outsourced sites and how many will agree to accept moving to the transfer agencies with the aim of finding a new job or at least postponing unemployment.

All participants in the negotiations at Opel declared that the agreement which has now been found is only the first step in the restructuring process at the company and that further negotiations will follow, which will also involve issues such as pay and working time for the remaining workforce. These negotiations can be expected to follow the example of other recent agreements on cost-cutting in the German car industry at DaimlerChrysler (DE0408102N) and Volkswagen (DE0411203F). (Heiner Dribbusch, Institute for Economic and Social Research, WSI)

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