German indignation over GM decision to keep Opel

BERLIN - November 4, 2009

Klaus Franz, Adam Opel GmbH's top employee representatives, said workers would walk out starting Thursday in brief, so-called "warning strikes" over GM's decision to call off a deal with Canadian parts maker Magna International Inc. and Russian lender Sberbank.

GM's decision late Tuesday was an abrupt end to months of negotiations that saw Germany's government agree to provide euro4.5 billion in financial aid for the Magna deal in September, clearing the way for the deal.

German labor leaders and government officials had favored the sale as the option most likely to preserve jobs in Germany.

German Economy Minister Rainer Bruederle, speaking to reporters ahead of a government meeting to discuss GM's decision to keep its European subsidiary, Adam Opel GmbH, and not sell a 55 percent stake to a Canadian-Russian consortium, said the money spent to encourage Opel's sale to the consortium would be recovered.

"We will get back taxpayers' money," he said Wednesday, referring to the bridge loan the government gave Opel last year to keep it afloat until Canadian auto parts maker Magna International Inc. and its partner Russian lender Sberbank could take it over.

Industrial union IG Metall said workers at Opel's four German plants would halt work Thursday, followed by similar moves Friday at other Opel locations in Europe. Opel has more than 25,000 workers in Germany. GM Europe, which employs 54,000 workers in total, also markets brands including Cadillac and Chevrolet in Europe. It also produces the Vauxhall brand in Britain.

"I expect (GM) to lay its restructuring plans on the table as quickly as possible," said Bruederle, who took over the post of economy minister last month, after Chancellor Angela Merkel's re-election.

GM Chief Executive Fritz Henderson said the decision by the company's board was the result of an overall improvement in Europe's business environment and GM's health since it put the division up for sale late last year.

GM once favored a rival bid by investment firm RHJ International, in part for fear that Magna and Sberbank could create competition for Chevrolet in Russia, a key market.

Earlier this year, GM's new, post-bankruptcy board had ordered management to consider more options, including keeping Opel, in part over worries that the company could lose control of shared GM-Opel technology and patents to competitors.

Opel, in its own brief statement Wednesday, said that GM's decision showed that the Opel and Vauxhall units play an important role in the global GM family, "a position that GM doesn't want to give up."

GM's announcement came the same day that Merkel spoke to a joint session of the U.S. Congress and after she had departed for Germany.

Henderson said GM will work with Europe's unions "to develop a plan for meaningful contributions to Opel's restructuring."

GM will first have to face indignation from German labor leaders. "We won't help shape the way back to General Motors," said Franz, the head of Opel's works council.

"Instead, we'll take up our classic function of defending the workers," he said without elaborating.

Franz said that GM's next step will likely be to try to seek help from governments and workers across Europe in a bid finance any restructuring, a move he said Opel workers were not keen on.

He said that workers' representatives won't agree to the "extortion" and will cancel concessions they had agreed to make to help the Magna deal go through.

Opel's employee council on Tuesday said that European workers had agreed with Magna to offer cost-cutting contributions worth euro265 million a year. In Germany, workers had agreed to forego pay increases through 2011 and give up part of their traditional Christmas and summer bonuses.

The industrial union IG Metall also criticized GM's decision.

"This is an unbelievable action," Berthold Huber, the union's president, said. "Opel has been brought to this difficult situation, through years of mistakes by GM's management. Therefore, it's not likely that GM will be able to produce a viable solution" for Opel.

Ferdinand Dudenhoeffer, a professor of auto economics at the University of Duisburg-Essen, said GM appeared to be driving forward with the "highest possible risk" by not selling Opel.

He said the European market has seen lagging growth and boasts ferocious competition among car makers, including Volkswagen AG, Fiat SpA and PSA Peugeot Citroen SA.

GM Europe has the fourth-highest auto sales in Europe, after Volkswagen, PSA and Ford Motor Co., according to the European Automobile Manufacturers' Association. European sales had fallen 6.6 percent through September, but sales of Opel and Vauxhall cars have fallen even further, with a drop of 11.4 percent.


AP Business Writer George Frey in Frankfurt contributed to this report.


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