General Motors plans huge job cuts at European unit Opel | Business| Economy and finance news from a German perspective | DW | 05.11.2009
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General Motors plans huge job cuts at European unit Opel

US auto giant General Motors says its planned restructuring of Opel would involve massive job cuts. The announcement follows a decision by GM not to sell off the carmaker to Canadian car-parts maker Magna.

The Opel logo atop one of the carmaker's factories

GM has not said where the job cuts would be made

General Motors Vice President John Smith said Wednesday that around 10,000 jobs would be slashed at the company's European unit Opel, which employs some 55,000 Europeans in Germany, Spain, Belgium, Poland and the UK. Smith did not specify where the cuts would be made.

The announcement comes less than a day after GM announced its decision not to sell off Opel to a consortium led by Canadian car-parts maker Magna and Russian state bank Sberbank.

The job cuts would be undertaken with the view to reduce costs at Opel by around 30 percent, Smith said, adding that the plan did not differ substantially from proposals for Opel tabled by Magna and Sberbank.

GM said it wanted to finalize its restructuring plans for Opel as soon as possible for presentation to European governments.

Muted response

The European Commission has responded so far in neutral tones to the decision by GM to hold on to Opel and its other European unit Vauxhall.

European Union competition spokesman Jonathan Todd said merely that the Commission, the EU's executive body, "takes note" of the decision.

Chancellor Merkel waves in front of an Opel logo

The German government was closely involved in bringing about the Magna deal

GM said it would keep its European operations because of an improvement in the economic environment. It's also understood that GM was concerned that its position as a global company would be damaged if Opel and Vauxhall were competing with it in Europe.

European governments are now awaiting a possible request by GM for aid to help it restructure Opel. The Magna-Sberbank consortium had been set to receive a massive state aid package from Germany to help along its restructuring plans.

The German state support had been the subject of an EU investigation into whether the funds were linked to the maintenance of jobs in Germany ahead of other European countries which host Opel plants, a move which would have violated EU competition rules.

Juergen Ruettgers, the state premier of North Rhine-Westphalia, where Opel's Bochum plant is located, demanded that GM keep all its Opel factories in Germany running. He told broadcaster ZDF on Wednesday that this should be a condition of any German state help.

He also demanded that there be no operational redundancies in Germany, and that any job cuts should be "socially responsible". Ruettgers promised there would be no financial aid from North Rhine-Westphalia if the Bochum plant were closed down. "No-one can expect us to pay for the closure of the Bochum factory," he said.

3,000 Opel workers are expected to appear at a demonstration on the Bochum factory grounds on Thursday afternoon. The rally is being organized by industrial trade union IG Metall, and production is expected to stop for its duration.

Ruettgers will speak at the demonstration, as will local Social Democrat Party head Hannelore Kraft, and trade union leaders Rainer Einenkel and Oliver Burkhard.

"Germany's decision"

Todd said the same rules would apply if GM applied to European governments for funding now it has decided not to sell Opel.

The German government had confirmed to the EU that the money would have been available to any of the potential buyers, Todd said, adding that it was not for the EU to tell Germany what to do with its money now.

"That is a matter for the German government," he said. "The Commission cannot suggest or oblige member states to give state aid; we can however and do verify the conditions of any state aid that is given."

The Commission insisted it is ready to facilitate discussions between GM and its European partners if needed.

But now GM has backed away from a deal at the very last minute, it may be significantly harder to establish trust between the parties.

Author: Nina-Maria Potts/mll/dfm
Editor: Nancy Isenson

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