HAMBURG U.S. automaker General Motors' (GM.N) German unit Opel is in talks with workers to cut their hours at its main Ruesselsheim plant in response to weakening demand for cars in Europe, and could seek government subsidies to compensate lost wages.
GM lost $747 million on its European operations last year as a weak economy hit car sales in the region, forcing carmakers to confront high fixed costs and excess production capacity that GM has said equates to 10 plants.
The "deteriorating market situation in Europe" had led it to negotiations with the works council and labour union IG Metall over reduced working hours, the company said in an e-mailed statement on Thursday, confirming an earlier newspaper report.
Opel said it expected to conclude talks shortly for shortened working hours in Ruesselsheim, where it makes the Insignia sedan and the Astra compact car.
Of almost 14,000 people who work for Opel in Ruesselsheim, the 3,500 factory workers are likely to be most affected. A spokesman said it was not yet clear how working hours could be reduced in administrative jobs.
German daily Allgemeine Zeitung Mainz earlier cited company sources as saying Opel was also considering shortened working hours at Kaiserslautern, a plant with 2,500 workers that makes components. Opel did not confirm that information.
The works council in Ruesselsheim declined to comment on the matter. IG Metall was not immediately available for comment.
Opel has four plants in Germany - in Ruesselsheim, Bochum, Kaiserslautern and Eisenach.
In June, Opel's supervisory board approved a medium-term business plan, which runs through 2016, in a step towards returning to profitability.
The plan involves "massive" product investments, a revamped brand strategy, an increase in exports, cuts in material, engineering and development costs as well as added savings from its alliance with France's Peugeot Citroen (PEUP.PA).
But real savings in a restructuring will not come until GM negotiates a deal with labour unions to close Opel's plant in Bochum, Germany, after 2016.
Utilization at the Bochum plant is relatively high thanks to the popularity of the profitable and fashionable Zafira compact minivan. Opel has no plans to shorten working hours in Eisenach, where it makes the Corsa subcompact.
If management and labour agree to shorten working hours at Ruesselsheim, Opel can apply for subsidies under the German government's short-work program, called "Kurzarbeit".
The scheme was used by many struggling companies in the 2008-2009 recession, allowing them to preserve jobs by cutting employees' hours when plant usage was low and having the government compensate workers for part of their lost wages.
The government pays workers in the program 60 percent of their net lost wages for up to six months, or 67 percent if they have children.
At the height of the global financial crisis, more than 1.4 million workers in Germany received money under the program.
That figure stood at only about 80,000 in May, but several companies have had to seek subsidies in recent months.
U.S. automaker Ford (F.N) applied for shortened working hours at its German plant in Cologne in April, hit by a slump in demand for cars in southern Europe.
Opel has not yet filed an application but has requested an urgent appointment with the head of the labour office in Darmstadt, which covers the Ruesselsheim plant, to discuss shortened working hours, a spokeswoman for the office said.
(Additional reporting by Holger Hansen in Berlin; Writing by Maria Sheahan; Editing by David Cowell and Helen Massy-Beresford)