Opel, labor clash on restructuring plan

RUESSELSHEIM/ANTWERP Tue Jan 26, 2010 11:42am EST

RUESSELSHEIM/ANTWERP (Reuters) - General Motors GM.UL wants staff to accept its restructuring plan for European unit Opel by mid-February, finally letting the carmaker cut excess capacity by closing a plant and shedding 8,300 jobs.

But bad blood with labor puts the timetable in doubt.

"I hope to get the plan finalized in two to three weeks," Opel Chief Executive Nick Reilly told reporters on Tuesday at the company's headquarters outside Frankfurt.

"There is a hiatus in the talks because of Antwerp, but next Monday we will have our first meeting," Reilly added.

Angered by Thursday's announcement that Opel's Antwerp plant would close -- a step one union leader called a "declaration of war" -- labor has frozen negotiations over 265 million euros ($373 million) in annual wage savings over the next five years.

Belgian unions sued GM, alleging breach of a contract it signed to build a small SUV in Antwerp, Opel's European works council said.

"Nick Reilly said today things would be done in two to three weeks and there will be contributions by workers. No, we say no," European Metalworkers' Federation boss Peter Scherrer told reporters at the factory, where the Belgian and Flemish flags flew at half mast.

"There will be no sacrifice and no concessions by the trade unions or by the workers in other plants -- nothing if this decision is not reversed. The precondition for everything is that the management takes back the decision to close Antwerp."

GM signed a document on the SUV project in 2008 that Reilly called a "plan, not a commitment."

Opel faces another loss in 2010 as government incentives in its core western European market wind down, taking out some 1.5 million units in industry volume -- roughly 100,000 more than Opel's output when overall demand was strong a few years ago.

As a result, Reilly dismissed labors' accusation that he is cutting into muscle and bone rather than fat, leaving Opel too weak to react to a rebound in demand in the coming years.

"Even with the closure of Antwerp, our capacity is 1.5 million and that's before any overtime or any improvements that we can make," he said. Shutting operations down there was only the first restructuring step, albeit the most dramatic.

CASH RESERVES AND STATE AID

"There are going to be cost reductions across the whole of Europe to get our break-even point much lower, so we can be in a position to make money even in a weak market," Reilly said, adding that demand would remain tepid for two to three years.

He expressed hope that the Flemish regional government under Premier Kris Peeters would meet Opel to discuss a joint solution that could entail finding an investor for the Antwerp plant.

"We would be very flexible and work with them since the impact of closing the plant can be substantially reduced. Up until now the government has refused to talk about any of those things, which I find rather extraordinary," Reilly explained.

In addition to the 600 million euros in fresh equity that GM has already contributed to Opel, Reilly has requested 2.7 billion euros in state aid either as loans or loan guarantees.

"Maybe we will not get the full 2.7 billion but I do expect we will receive a significant amount," he said.

All countries that host major Opel manufacturing sites -- except Belgium -- remain open to extending state funding in principle, according to Reilly.

Germany is set to get a formal aid application from Opel by next Friday once an independent expert opinion required by the government evaluates the viability of Reilly's plan.

Until long-term financing is secure, Opel has enough liquidity to operate "well into the second quarter" now that GM's patent unit advanced Opel 650 million euros this month for engineering work first due to be billed later this year.

Reilly reaffirmed his intention to find a successor model for Luton near London in case ongoing talks with Renault (RENA.PA) fail and the French carmaker pulls out in 2013.

Analysts believe French government pressure to relocate Renault Trafic production to France will be too great, and expect the panel van will be built in an underutilized site like its upper-segment plant Sandouville that builds the Laguna.

(Editing by Elaine Hardcastle)

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