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.
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.