Opel's Work Council Head Demands Clarity on GM's Plan for German Locations

Following yesterday's (17 May) announcement that General Motors (GM) Europe will concentrate production of the Astra at its plants in Ellesmere Port (United Kingdom) and Gliwice (Poland; see United Kingdom: 17 May 2012: GM Europe Saves Ellesmere Port Plant), the company's most powerful labour figure, European works council leader Wolfgang Schäfer-Klug, has demanded clarity on the future of the automaker's German production locations. According to a Dow Jones Newswire report, Schäfer-Klug said that his body and the IG Metall union would fight to protect jobs in Germany and would not accept any moves to reallocate production of the Zafira multi-purpose vehicle (MPV) from its current location at Bochum to the company's plant in Rüsselsheim in order to make up for Astra production ending at the plant. Any such move would sound the death knell for the Bochum plant. Schäfer-Klug added that the company's management needed to communicate a comprehensive plan for the future of the firm's German plants as quickly as possible.

In a statement yesterday, Opel/Vauxhall CEO and GM Europe CEO Karl-Friedrich Stracke moved to reassure workers at the Rüsselsheim plant, but notably did not mention Bochum. He said, "A competitive Rüsselsheim plant plays an important role in our growth strategy. It has an outstanding and highly capable workforce, and it delivers excellent quality." However, if Astra production ends it would require another model to be made at the plant for the facility to be viable, with the Zafira being the obvious candidate, while production of Citroën's C5 D1-segemnt contender has also been mentioned as a possibility as a result of the alliance between GM and PSA signed earlier this year. The plan to manufacture the Astra at just two locations is designed to hugely increase capacity utilisation at these plants by moving to a three-shift system, and eradicating the traditional summer stoppages. The company's plants in the United States run at near full capacity, whereas its European plants are operating at between 55% and 65% capacity on average. GM said that the decision to build the next-generation Astra in Poland was due to the plant's cost competitiveness. In the UK, the flexibility of the Ellesmere Port plant's workforce, the plant's overall efficiency, and the advantage of being able to produce cars in its second biggest European market to limit exposure to fluctuations in the pound-euro exchange rate went very much in the facility's favour.

Outlook and Implications

In reality the simplification and rationalistion of GM Europe's production strategy was probably long overdue, irrespective of falling sales and production as a result of the extremely difficult environment that Opel/Vauxhall currently faces in the European market. According to the latest sales figures released by the Association of European Automobile Manufacturers Association (ACEA), Opel/Vauxhall's sales declined by 16.4% year-on-year (y/y) in the first third of 2012 to 288,490, equating to a significant loss of market share in an overall market that declined by 7.5% y/y during the same period to 4.3 million units. (see Europe: 16 May 2012: EU Passenger Car Sales Slide 6.9% Y/Y in April—ACEA). GM is trying to take action to stem the consistent losses that have been a feature of its European operations since 1999, which included a USD747-million net loss recorded for the full year in 2011 and USD256 million lost in the first quarter of this year. CEO Stracke has been tasked with coming up with a comprehensive and effective plan to drag the unit into profitability and yesterday's confirmation that Astra production would be concentrated in the UK and Poland was the first tangible announcement of this plan. Indeed, the decision to centre Astra production in Poland and the UK will vastly increase capacity utilisation by running these plants on a three-shift basis.

The production network of the Astra is a mess and needed rationalisation. As well as Ellesmere Port and Glwice, the five-door hatchback version of the Astra is currently made in Rüsselsheim, while the GTC three-door variant, five-door hatchback, and Sportwagon variants are all made in Bochum currently, albeit in relatively small numbers. It makes no sense to build the Astra in four different locations and the fact that the model is made in these locations is emblematic of the power of the German union base and the German plant works councils. It appears that GM has resolved to take on these institutions to show that there can be no sacred cows if GM Europe and Opel/Vauxhall is to become a profitable carmaker. It would appear a logical move to shift production of the Zafira from Bochum to Rüsselsheim, as has been widely reported, and this would appear to place the Bochum plant very much in the firing line for closure. It therefore appears inevitable that Opel's management is on a collision course with the works council and IG Metall over ther future of the plant, and deteriorating union/management relations and wide-scale industrial action in Germany look a distinct possibility. Whatever happens, no plant closure can take place before 2015, as per the previous agreement between unions and management that led to the previous, unsuccessful restructuring that was agreed at the end of 2009 and implemented over the next two years, resulting in the loss of around 7,000 jobs and the closure of the firm's Antwerp plant. The extended timescale will at least allow Opel to offer workers a structured exit package, including the option of early retirement, and this may act in the company's favour.