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GM ups the ante in talks over Opel factory closure

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A banner hangs on the front of the General Motors Co world headquarters announcing GM's return to NYSE in Detroit
A banner hangs on the front of the General Motors Co world headquarters announcing GM's return to NYSE in Detroit

By Christiaan Hetzner and Andreas Cremer

FRANKFURT/BERLIN (Reuters) - General Motorssaid on Tuesday it may close a German factory at its Opel subsidiary earlier than proposed adding restructuring talks with unions must be wrapped up by February, as the U.S. carmaker seeks deep cuts to save its ailing brand.

Raising the pressure on its more than 20,000 workers in Germany, GM Vice Chairman Stephen Girsky said the company would carry out its original plan to shut production down at the northwestern Bochum plant as soon as the current contract permits, should talks collapse.

"I have asked the Opel management and labor to reach a solution in February. Our Germany Plan must then be finalized," GM Vice Chairman Stephen Girsky told employees on Tuesday in a letter obtained by Reuters.

"The (current) contract expires at the end of 2014. Production of the Zafira in Bochum would then end and all assembly cease as of January 1, 2015," Girsky wrote in the letter, which was verified by General Motors.

It is the first time the company has issued a specific timeframe for a deal in negotiations between Opel management and its Germany workforce. The talks, which have dragged on since last June, were agreed on the basis that management wanted to close Bochum when the current lifecycle of the Zafira Tourer MPV ends - largely considered to be towards the end of 2016.

GM's European operation, which consists mainly of Opel and UK-based Vauxhall following the sale of Saab to Spyker in 2010, has racked up around $16 billion in losses since 2000 owing to uncompetitive models, a sickly brand image and more recently a sharp plunge in the European car market.

This has prompted analysts to call for Opel to be sold almost at any cost and triggered speculation that GM is working behind the scenes to offload Opel onto its French partner PSA Peugeot Citroen, which is itself struggling to find sufficient economies of scale to stay afloat.

The Opel works council in Germany and IG Metall trade union negotiator said in response to Girsky: "The threat to cease all production in Bochum at the start of 2015 is unacceptable."

A spokesman for Opel said it was for the workforce to decide whether they would take up an offer tabled by management to maintain production past 2014. GM is demanding that Opel staff wages in Germany be frozen until the unit returns to profit.

"Ahead of today's negotiations in Bochum, the first since December's announcement, Steve Girsky appealed to staff to join company efforts in guaranteeing that Bochum has a future after 2016, even if it is not with Opel," the spokesman said.

"CATASTROPHIC" MARKET

Girsky said management would not budge from its plans to close Bochum and cut some 3,000 jobs there, regardless of workforce and union proposals to build the next-generation Mokka subcompact SUV at the plant, which sits astride an abandoned coal mine in an economically depressed area in northwestern Germany.

"The situation in the entire European (car) market is still catastrophic," Girsky wrote in the letter. "That's a difficult precondition for forthcoming negotiations" with German staff.

GM forecast Opel will have made between $1.5 billion and $1.8 billion in losses last year, with only a slight improvement expected for this one. Detroit has pushed back the breakeven point, initially expected two years ago, to the middle of the decade.

IG Metall said it could not agree to GM's freezing wages for a sustained period of time, since this would grant preferential treatment to one company over all the other goods manufacturers in Germany that are bound by industry-wide wage agreements.

"For this reason IG Metall cannot and will not ever agree to that," they wrote in the statement.

IG Metall has long warned that GM's rounds of restructuring at Opel only serve to further weaken the ailing subsidiary and widen the already substantial gap between it and Volkswagenin Germany.

VW only once resorted to large scale job cuts in Germany back in 2006 and its domestic staff has almost returned to the previous size of roughly 100,000 workers as its strong brand and diversified model line-up help it take share from competitors like Opel and Peugeot.

(Reporting by Andreas Cremer, additional reporting by Maria Sheahan. Editing by Sophie Walker)

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