Impact of Opel restructuring plans in Spain

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In August 2001, the management of Opel (a subsidiary of the US-owned General Motors) announced plans to cut European production by 15%. Press reports suggested that this could lead to closure or major workforce cuts at the motor manufacturer's plant at Figueruelas in Spain. However, a subsequent agreement reached by management and the General Motors European Works Council provided that the restructuring would not involve plant closures or compulsory redundancies, and that employment adjustments would be achieved through early retirement, voluntary redundancy and redeployment. Nevertheless, in Spain the company has plans for the pre-retirement of 500 workers and a 20-day lay-off during the remainder of 2001.

The 2000 financial year marked a serious setback in the market share of US-based motor manufacturing companies in comparison with those based in Europe and Japan: General Motors suffered an 18.1% fall in car and van sales compared with 1999, whereas Ford and Chrysler (the US subsidiary of DaimlerChrysler) saw a 14.8% fall. On the other hand, the European companies sold 13.8% more vehicles and the Japanese 6.2% more.

These difficulties of the US companies have arisen in the context of a market that shows incipient signs of cooling down: in 2000, car production in the USA fell by 1.70% in comparison with 1999, whereas production in Europe fell by only 0.71%. However, the Korean and Japanese markets are recovering after the financial crisis of 1997, with production growth of 10.17% and 3.25% respectively in 2000. Compared with 1999, car registrations in 2000 showed an increase in the USA (1.71%) and Japan (2.55%) and a sharp increase in South Korea (16.50%). In Europe, registrations fell by 2.21% and in Germany by 11.5%.

One of the US-owned companies that have experienced problems in their European markets is the German-based Opel Europe (a subsidiary of General Motors), which showed a loss of EUR 273.5 million in the first half of 2001, due to an 8% fall in car sales in Europe in 2000, and a loss of market share which placed it behind the German Volkswagen and French PSA groups. The company claims to have a surplus capacity in Europe of 15%, representing between 300,000 and 350,000 units per year.

The former chair of Opel, Robert Hendry, resigned in January 2001 because he was unable to stop the company's losses, which amounted to EUR 427 million in the 2000 financial year. Carl-Peter Forster, formerly at BMW, took over as chair of the company on 1 April 2001, with the aim of stopping the losses and carrying out a thorough reorganisation of the European division of Opel in the framework of the company's restructuring plans (known as the 'Olympia' plan).

Olympia plan and restructuring of Opel in Europe

Workers and trade unions at Opel were alarmed by the news that appeared in the German edition of the Financial Times on 10 August 2001, claiming that management planned to dismiss thousands of workers and close its plants in Figueruelas (Zaragoza, Spain) and Antwerp (Belgium), in the framework of its Olympia European restructuring plan. Opel has 19 plants in Europe and a workforce of 86,000 workers, of whom 8,727 work at the Spanish Figueruelas plant.

Mr Forster did not clear up the uncertainty at a press conference on 15 August 2001, at which he presented the Olympia plan: its main aim was to reduce the surplus capacity of the company at its European plants by 15% and to improve its financial situation, thus saving EUR 2 billion per year. To achieve this, among other measures, it planned thousands of job losses, either distributed among the plants of the company in Europe or concentrated in one of them, resulting in its closure. The final definition of the Olympia plan was left until September 2001, dependent on a meeting to be held with workers' representatives.

At a meeting of Opel management and the steering committee of the General Motors Europe European Works Council (EWC) at the company's head office in Rüsselsheim on 20 August 2001 (BE0109301F), the parties agreed that: the reorganisation will be carried out without a site closure and that adjustments in employment levels will be handled in 'socially responsible' ways, such as early retirement programmes, voluntary redundancy and the transfer of workers between Opel plants. The workers' representatives expressed their support for the objectives of the Olympia plan, 'to ensure company profitability and sustainable growth'. The understanding reached by the management and EWC representatives was later formalised in a framework agreement. The specific measures to be applied in the process of restructuring Opel Europe were to be decided at national level and would not be known for some time, so some uncertainty continued.

The future of the Figueruelas plant

Opel Spain showed a loss of EUR 73 million in 2000, while in the 2000 financial year its production fell by 9.12% - which represented a level of production at the Figueruelas plant of 50,000 units less than its capacity. The company's forecasts show that the downward tendency of car sales will continue in 2001, so in June 2001 it presented an application for adjustment of employment levels to the Directorate-General for Employment of the government of Aragon (the autonomous community in which the plant is located), whereby production would be halted for 20 days, affecting 8,150 jobs. The Figueruelas workers' committee presented an appeal, but the Aragonese Ministry of Economy, Inland Revenue and Employment rejected it in late August.

In addition to the shutdown of production for 20 days, in the framework of the general agreement with the EWC which states that there will be no plant closures or major redundancies, 500 persons employed at the Spanish plant will go into pre-retirement.

New people-carrier to be produced at Figueruelas

In early June 2001, the management of Opel Europe decided to assign the production of the new Monocap people-carrier to the Figueruelas plant, ruling out the other alternative, which was the factory in Clivice (Poland). This decision will involve an investment of EUR 480 million, of which 10% will represents research and development subsidies from the Ministry of Science and Technology and the government of Aragon. The support of the Spanish government and the signing of a new collective agreement which is sufficiently flexible for the future plans of Opel Spain were the two decisive factors in the choice of the Spanish plant.

The production of the new people-carrier will begin in 2003, and will involve the creation of 2,000 indirect jobs and the incorporation of 10 supplier companies. Some 90% of the production of the Monocap model, which is in a segment experiencing increasing demand in Europe, will be exported. The volume of production will be between 150,000 and 200,000 units per year.

The current five-year investment plan (1998-2002), involving a total of EUR 963 million - which will be allocated mostly to the launching and production of the new Corsa model - the EUR 480 million assigned for the production of the Monocap people-carrier, and the fact that Figueruelas is one of Opel's most competitive European factories, may reduce uncertainty over the decisions that the management of Opel Europe may take about the future of the factory.

Commentary

Other motor manufacturers operating in Spain are also facing problems: SEAT (a subsidiary of the Volkswagen group) is suffering from falling sales; Nissan shows falling sales prospects; FASA Renault is using a flexible 'working time pool' laid down in a collective agreement to solve problems arising from the supply of parts; and SANTANA MOTOR is facing a lack of liquidity as a result of the excessive cost of supplies, paid for in Japanese currency, and a delay in the application of a 'shock plan' agreed by company management and the government of Andalusia.

The symptoms of weakness shown by the US market have had direct effects on the component manufacturers Delphi Automotive Systems and Dana, which have announced thousands of redundancies in the USA and Europe. These decisions have had direct consequences on Spanish subsidiaries, such as: a recent long dispute at Delphi Diesel over flexibility negotiations (ES0101231F); disinvestment and the transfer of business to North Africa and eastern Europe at Delphi Packard; the closure of Lear's Vigo plant; and possible repercussions arising from the current problems of the French-owned Valeo.

However, the Spanish plants are among the most productive in their respective companies, and have therefore obtained commitments to produce new models, involving large investments. Opel Spain will produce a new people carrier; Nissan plans to produce a new model; FASA Renault has plans for major investments in the production of gearboxes and engines; Ford plans to produce two new models; and the PSA group will reinforce business at both its Citröen and Peugeot plants. These investment plans also respond to the excellent situation of the Spanish car market in recent years, and the expectation that it will be maintained in 2001 despite the forecasts of a certain slowdown, which will be far lower than that forecast for Europe as a whole.

The very high competitiveness of the Spanish factories is directly related to the large margin for manoeuvre in organisational flexibility that has been achieved in recent years: more flexible working time, with the general use of overtime and working on Saturdays; flexible pay through the wage increases allowed by flexible working time; and above all the use of temporary employment in night shifts and on Saturdays, and outsourcing to external suppliers with lower pay. (Manuel Sánchez, Fundació CIREM).

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