GM Europe CEO Steps Down; Opel Unions to Negotiate with GM If Autonomy is Guaranteed

Carl-Peter Forster, the head of General Motors (GM) Europe who has overseen the company's operations throughout the last 12 months of uncertainty and who acted as the bridge between Opel and Magna International during the latter's bid to take a majority stake in Opel, has decided to stand down from his position. According to a Financial Times (FT) report, Forster will remain in an advisory role as GM looks for a permanent successor. Forster was an advocate of the Magna International solution for Opel and appears highly uncomfortable with the decision by GM's U.S. management to perform a U-turn on the deal, which was well advanced. Speaking last week, he outlined the difficulties involved with GM scrapping the Magna-led restructuring plan for Opel. "We had negotiated a good restructuring plan which was ready and on the table", Forster told German newspaper Bild. "Now there is a danger that the sensible distribution of the burden we had agreed will unravel and the process will start all over again. One thing is certain: even with this solution, there will be massive cuts."

Forster is expected to be succeeded on a short-term basis by GM's head of international operations, Nick Reilly. Reilly is a highly experienced and well-regarded GM executive who has in the past managed the company's Vauxhall operation in the United Kingdom and who oversaw the increasing prominence of the GM Daewoo unit in GM's global sales mix and product development strategy. Reilly is seen as the man to lead the restructuring of GM's European operations under the company's continued ownership but he faces a very difficult task in winning over the support of Opel's powerful German union base, which is outraged at GM's decision to turn its back on the Magna bid. The unions in Germany staged strikes on Friday (6 November) involving around 10,000 workers (see Germany: 6 November 2009: GM Confident of Financing European Operations as German Unions Stage Strike). Speaking at a meeting, Opel union leader Klaus Franz said that the credibility of GM's management with regards to its stance on Opel is close to zero.

In an interview with Reuters at the weekend (7-8 November), Franz reiterated these comments and added that the German union bloc would only co-operate with GM's management team in talks over the future of Opel if the terms of the previously agreed Magna contract were honoured. Franz said, "GM does not enjoy any credibility or faith in the eyes of the public or the [German] government, so they have to consider whether they now want to seek confrontation or cooperation by finding a common solution. To see whether they are interested in cooperation, we need to know whether they are willing to start off where we last stopped—namely, the degree of autonomy and freedom that was set in the contract with Magna and accepted by General Motors." Franz described this as a condition for talks to commence, something that it is clear GM will not agree to. GM chief executive officer (CEO) Fritz Henderson is due to travel to Opel's headquarters in Rüsselsheim (Germany) this week and is expected to discuss the decision with local management today. Meanwhile, German Economy Minister Rainer Brüderle has said that he does not believe that GM will be afforded the same package of financial aid that was on the table for the Magna International deal. He said he was sceptical that GM would be able to come up with a plan for Opel's future that matched Magna's and that certain criteria had to be met. Speaking on ZDF television, he said, "Autonomy, no siphoning off money to America, and a sustainable plan for the future. At the moment I don't see any of these three criteria being fulfilled."

Outlook and Implications

The level of opposition and antipathy that exists in Germany towards GM is the biggest obstacle that the U.S. carmaker faces in formulating a sustainable plan for the future of its main European unit. The German government has been severely embarrassed by GM's U-turn as it very publicly backed the Magna International bid for Opel. In addition, Fritz Henderson and Nick Reilly will have to launch a major PR offensive to win over the German workforce, which saw Magna's bid as the best chance of safeguarding the maximum number of German jobs. Klaus Franz has been consistent in his position on the Opel sale process, stating that he and his union's members would not back any attempt by GM to retain control of Opel. Furthermore, the German government maintains that it is under "no obligation" to provide state financing to GM and will wait for the company's presentation on its restructuring and financing plans before considering possible aid.