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Same-Day Analysis
Opel Restructuring Hits Labour Snag; U.K. Government Willing to Invest in Vauxhall
Published: 1/20/2010
IHS Global Insight Perspective | |
Significance | Opel Vauxhall has not made any progress recently towards securing concessions from its labour force, concessions that are vital in ensuring a viable restructuring plan. However, one positive development for General Motors' (GM) European operations is that the U.K. government has said that it is willing to invest in Vauxhall. |
Implications | The head of Opel's German workers' council has said there are "no talks ongoing" between Opel's new management team and the labour force, which is not a positive sign given the charm offensive that has been mounted recently by GM Europe and Opel chief executive Nick Reilly. |
Outlook | It goes without saying that the workers need to be fully on board with Opel and Vauxhall's restructuring plans. The labour force is simply too large and the company has too much excess capacity for it to be competitive in the current economic climate, and the planned 8,000 job cuts must be made. |
With Opel's new management team, led by General Motors Europe (GME) chief executive Nick Reilly, due to unveil the final restructuring plan for Opel and Vauxhall by the end of the month, it appears that there may be an obstacle in terms of labour concessions. According to a Dow Jones Newswires report, Opel's highly influential labour council leader Klaus Franz said that, "There are no talks ongoing." Given the timescale that Reilly previously announced for outlining the restructuring plans, this is a far from positive sign and suggests an impasse between Opel's new management and the company's blue-collar workers over proposed job cuts and changes to working practices. The workers' agreement and participation in any restructuring plan is vital and the single most important component towards helping the company return to competiveness. It is a particularly unpromising sign for the prospects of an agreement given that Reilly has been engaged in a major charm offensive in an effort to persuade Franz that the management's restructuring plan is in the best interests of everyone at the company (see Germany: 9 December 2009: Opel Labour Chief Adopts Conciliatory Tone to GM's New Management). According to the Dow Jones report, the atmosphere during the latest round of talks between management and the unions had been "very bad according to a source close to the situation." However, despite the fact that an agreement with the unions looks far from certain, a spokesperson for Opel said there were no plans to adjust the timing of a presentation of GM Europe's restructuring plan. He said, "We assume that we can talk [about the pending issues]." It is possible that the main stumbling block is not centred around proposed job cuts, but instead around the issue of Opel and Vauxhall workers taking a stake in the business. Last week, Reilly said at the North American International Auto Show (NAIAS) in Detroit (United States) that the company had notreached an agreement on workers taking a shareholding in the business. However, this directly contradicted what Franz had said a month earlier when he told reporters that GM's management had agreed in principle to Opel's workers taking a stake in the unit. Franz has been lobbying for a deal that includes staff taking a 10% stake in Opel in return for labour concessions.
However, a more positive development from GM's point of view is the news that the U.K. government appears willing to provide state support to the company's Vauxhall manufacturing operations in Luton and Ellesmere Port. According to Dow Jones International, U.K. business secretary Lord Peter Mandelson said, "We have already said that we would be prepared to support Vauxhall to underwrite the new financial arrangements going forward", adding that the government has the funds "ready for this major investment". Later a spokeswoman for Mandelson's department added, "We are working closely with GM on U.K. participation in a potential funding package for Opel/Vauxhall. Our aim is to give our U.K. plants the best possible chance in a restructured...business."
Outlook and Implications
Although Nick Reilly in his newly appointed dual role as chief executive of both Opel/Vauxhall and GME is looking to forge ahead with plans to release news of a definitive restructuring plan by the end of the month, it is hard to see how such a plan can be taken seriously without the full participation of Opel and Vauxhall's workers. It is all well and good for Opel to say, "We assume that we can talk [about the pending issues]", but the fact remains that no deal will be feasible without the full agreement and participation of the company's blue-collar workers. The company is expected to announce job losses of between 8,000 and 9,000 staff across its entire European operations, which will be culled from Opel's and Vauxhall's current 48,000-strong staff. However, exactly how these job cuts will be spread around the company's European operations has yet to be fully agreed, although it looks increasingly likely that GM will push ahead with initial plans to close its Antwerp plant in Belgium following a report from Reuters published today. In the report a company source said, "They did not back down from the decision to close Antwerp. Now Reilly has announced that this would be implemented." If the plant is closed it will result in the loss of 2,300 jobs. Opel does not have a lot of time to negotiate an agreement with its workforce. In a letter to employees earlier this week Reilly said that the European market is expected to record a further fall in 2010, putting extra pressure on the company's stretched finances. He said, "We don't just have to turn our operating results around in normal circumstances. We must deal with a very difficult market environment. In 2010 we expect the Western European market to be 1.5 million units lower than an already weak 2009. So, we need to move fast." He also added that the company needs to address major structural weakness in its product range. Reilly wrote, "We are not leading in hybrids or pure electric vehicles and our traditional powertrains have mixed performance in fuel economy, CO2 [carbon dioxide emissions] and driveability. We intend to address these as quickly as we can." As a result time is a luxury that Opel and Vauxhall do not have. Reilly will be hoping that Franz and his colleagues will soften their position and that constructive talks can continue once more.Most Viewed Articles
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