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Opel asks for job cut aid

2010-02-10 07:18

Frankfurt/Berlin - General Motors unit Opel has asked Germany for 1.5 billion euros in state aid to fund some 4 000 job cuts in its home country that would help return Opel to profitability no later than 2012.

Earlier on Tuesday, Opel Chief Executive Nick Reilly submitted a restructuring plan approved by external auditor Warth & Klein that included some 11 billion euros earmarked for investments by 2014.

"We will carefully examine the documents," said Economy Minister Rainer Bruederle, adding Opel has requested another 1.2 billion in aid from Spain, Britain, Austria and Poland.

Chancellor Angela Merkel championed a plan to risk 4.5 billion euros in German taxpayer funds should GM sell a majority stake in Opel to Canadian auto parts supplier Magna, but talks between Berlin and GM management have been strained ever since Detroit backed out of the deal in November.

A member of the free-market liberals in Germany, Bruederle has repeatedly called on GM to fund Opel's operations itself, and not just contribute 600 million euros.

While the better part of 11 billion euros in planned investments would be funded from Opel's own operations once the company returns to the black, it is not unusual in the auto industry for subsidiaries to finance themselves so long as they can rely on economies of scale from its larger parent.

Nevertheless, trade union IG Metall, which represents most German auto workers, immediately condemned the plan on Tuesday, refusing to contribute wage concessions and recommending German state and federal governments decline the aid request.

Liquidity forecast

Talks over contributing 265 million euros in annual labour cost cuts over the next five years have run aground over Opel's decision to close its Antwerp plant in Belgium - a move one union leader called a "declaration of war", but which GM says is needed amid feeble demand that could stay weak for years.

Opel CEO Reilly told reporters in Frankfurt however that not receiving any aid from Germany was more of a hypothetical issue: "We don't anticipate being turned down."

Until a financing plan is agreed, current liquidity is forecast to last well into the second quarter.

Altogether, Opel expects to book restructuring charges of about 1 billion euros for reducing 8 370 staff headcount across Europe. This includes some 1 300 white collar jobs but excludes an additional 1 500 in cuts via early retirement plans.

Some 4 000 jobs alone would be cut in Germany while about 2 380 people would lose their jobs when Antwerp shuts down around the middle of this year.

Opel's next steps under discussion

By comparison, UK plant Ellesmere Port is due to add a third shift in mid-2011 and Reilly reaffirmed his pledge to secure Luton's future even if Renault backs out of a deal to build its Trafic van there come 2013.

His cuts, which also include 900 jobs at Opel's Zaragoza site in Spain, would eventually boost utilisation rates for Opel's installed European production base to around 87% on a three-shift basis from 59%.

Representatives of European engineering unions plan to meet in Brussels on Feb. 23 to discuss the next steps at Opel.

Opel reaffirmed it would renew four-fifths of its product line even as it shrinks to a profitable size.

"We now have a road map, we know where we are headed and we are working with all our partners so we can switch into high gear for a successful future," he told a news conference.


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