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Opel to Cut Capacity By Up To 25%

At least 10,000 jobs likely to go.

by on Nov.20, 2009

Despite some recent successes, with products like the new Insignia, Opel will need to cut capacity by 20 to 25%.

Despite some recent successes, with products like the new Insignia, Opel will cut capacity by up to 25%.

While it is “still finalizing” details of a turnaround plan for its troubled European subsidiary, Opel, General Motors expects to reduce its capacity by as much as 25%, a senior official revealed today, which would likely lead to a massive cut in jobs.

Earlier this month, GM reversed plans to sell a majority stake in Opel, which not only provides product for much of the company’s overseas dealers, but also serves as a major global product development center for brands like Chevrolet.

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The unexpected move has kicked off worker protests and rage among German politicians, who had brokered a proposed deal between GM and the Canadian auto supplier Magna International.  It has also generated concerns that Opel would be targeted for big cuts in an effort to staunch multi-billion-dollar losses.

That is an eventuality that Nick Reilly, Adam Opel GmbH’s acting CEO, confirmed in a corporate blog entry, today.  “What is clear is this: Opel/Vauxhall must reduce its capacity across Europe by somewhere between 20 and 25 percent,” said Reilly, who also serves as head of GM’s international operations.

The pronouncement was no surprise, nor was Reilly’s comment that, “We are still finalizing the details on the plan.”  He and other GM officials are set to meet with representatives of Opel’s European unions, next week, and it is likely the automaker will press to get back the concessions workers withdrew after the sale to Magna collapsed.

Meanwhile, the company will face off with government officials representing the five European countries where Opel has plants.  Enraged politicians, in Berlin, not only withdrew an offer to aid the new owners, had the sale gone through, but demanded GM immediately pay back a $3.7 billion bridge loan that had kept Opel out of bankruptcy.

Whether the Germans will now weigh back in is unclear, but representatives from Britain and several other countries have expressed interest in offering their own incentives, which could impact where the future cuts in employment occur.  It has been widely expected that at least 10,000 Opel jobs – equal to 20% of the workforce – will be eliminated.  Under the Magna deal, a disproportionate share of cuts would have taken place outside Germany, even though that country’s factories were considered among Opel’s least efficient.

Germany Rejects GM Bid to Help Opel

Automaker will need find help elsewhere.

by on Nov.12, 2009

Taking her soccer ball and going home since German jobs won't be overly potected?

Taking her "soccer ball" and going home since German jobs won't be overly protected?

Still smarting over General Motors’ decision to call off the sale of its German-based Opel subsidiary, government officials, in Berlin, have told the U.S. maker they won’t come up with any aid to keep Opel operating.

The Germans are also expecting GM to pay back the balance of  a $2 billion bridge loan, provided earlier this year, to keep Opel from failing, government officials have confirmed.

The bad news was relayed to interim Opel CEO Nick Reilly, and GM’s international director, John Smith, during a meeting with German Economic Minister Rainer Bruederle.

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While General Motors CEO Fritz Henderson said, this week, during a visit to Germany, that the automaker will cover a “sizable” share of Opel’s restructuring – and had also noted, recently – that the subsidiary’s finances are improving – GM is still hoping to raise additional money from some of the other European governments who have a stake in Opel’s survival.


Could Latest Obstacles Derail Opel Sale?

Germans give OK, but other governments could scuttle sale.

by on Oct.12, 2009

Worried about job losses, officials in Spain, Britain and Belgium could yet scuttle the sale of a 55% stake in Opel to Magna International.

Officials in Spain, Britain and Belgium could block the sale.

The sale of a majority stake in Opel, the German-based subsidiary of General Motors, is scheduled to be completed this week, but a variety of obstacles threaten to derail the deal, notably concerns raised by Spain, Britain and Belgium over planned job cuts that seem to favor workers in Germany.

The government of Chancellor Angela Merkel brokered the deal that would transfer 55% of Opel and GM’s British subsidiary, Vauxhall to Magna International, the Canadian-based mega-supplier, and a Russian government controlled bank.   GM had preferred another bidder which offered it the possibility of eventually buying back Opel, but the Berlin government – along with the powerful German union IG Metall – openly preferred Magna and its Russian ally, Sberbank, because they appeared more willing to protect jobs.

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But that has become the source of the ongoing trouble.  The number of likely jobs that will be cut as part of the Opel restructuring has now risen to 10,500.  But there is concern that a disproportionate share of the job losses – 6,500 in all – will occur outside Germany, even though some of the plants that will be impacted are among Opel’s most efficient.