IHS Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
The management of Opel has finally agreed a timescale for ending car production and an important wage freeze with IG Metall and the company's works council.
IHS Automotive perspective
As predicted by GM's deputy chairman Steve Girsky earlier in the week, Opel has finalised its "Deutschlandplan" labour agreement with the works council and labour union IG Metall; it will underpin the future of the company's main European unit.
The unions and works council have finally agreed in full to GM's plans to cease car production at the Bochum plant when production of the current Zafira ends in 2016. However, in exchange there will be no compulsory redundancies at the plant until 2016 at the earliest while Opel will maintain the site as a component facility. In addition Opel and the labour unions have also agreed to defer "tariff-bound pay increases".
While GM has not gone the whole hog in closing Bochum completely, the site will be much diminished and will have a much smaller headcount as a component facility, while the agreement to defer pay increases must be regarded as a major win for GM's management as it looks to right-size its production capabilities and cost base for the new reality of the Western European passenger car market.
The management of Opel has announced that it has agreed a comprehensive new labour agreement with the company's works council and the industrial union IG Metall, which will govern and safeguard the short-to-medium-term operations of General Motor's (GM's) main European production arm in its main location of Germany. According to a press release, the "Deutschlandplan" (Germany-wide plan) has secured agreement on a wide range of measures which will improve the competiveness and lower the cost base of Opel's German operations.
The main points of the agreement are as follows:
In addition negotiations have also taken place with regards to the other locations in Opel's German production network:
Outlook and implications
The agreement with Opel's works council and the IG Metall union, which will govern the future shape, production provision, headcount and cost base of Opel's domestic production locations, has been months in the making. However, now the agreement has been reached and signed off by the respective parties, it at least gives Opel's management a stable set of numbers on which to work on in terms of salary costs and headcount, while the eventual of closure of the Bochum plant will also significantly improve the capacity utilisation of the other two car manufacturing plants that will continue to build cars in Germany, Eisenach and Rüsselsheim. With capacity utilisation likely to be averaging around 60% at Opel's German plants, this will be a welcome development, However, there are still significant concerns over whether the Opel plan will deliver the cost savings to move GM's main European unit back into the black in the kind of timescale that will placate investors, especially institutional investors in the US, who have been vocal in their criticism of GM Europe's performance, which has been a consistent drag on the balance sheet of the parent company. The fact remains that the Western European passenger car market, the majority of which Opel's German production goes to serve, is experiencing something of a severe contraction. In 2012 the Western European market contracted by 8.2% y/y across the EU 27 countries, according to ACEA data, while Opel's brand sales fell at almost twice the rate, with a 15.8% y/y decline to 815,961 units in the same territory. In 2012 GM Europe lost USD1.8 billion (see United States: 15 February 2013: GM's 2012 earnings fall 35.5% y/y on European woes) and the company does not expect to break even until the middle of the decade. However, if the European car market continues in its current slump any kind of timescale to break even could be significantly extended. The cost savings will come, but it remains to be seen whether the company can afford to wait until the end of 2016 for the full extent of these savings to take effect, especially in an environment where the mainstream mid-market European brands are faced with either engaging in profit-slashing discounting in order to maintain volumes, or losing both share and volume while attempting to maintain transaction pricing. However, one highly positive aspect of the agreement from GM's point of view is the agreed pay freeze. Opel could not be expected to match the pay increases agreed throughout the sector when it is operating in a completely different market paradigm to the likes of BMW, Volkswagen and Mercedes-Benz, which continue to book strong profits from high export sales, especially in the premium markets in the US and China.