Jobs cull Struggling Opel could lose 20% of workers

Opel could be forced to cut 3,700 jobs in Germany in a dispute with its new French owner over urgently needed restructuring. But Chancellor Angela Merkel, it seems, is backing the embattled carmaker.
Quelle: dpa
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(Source: dpa)

When it comes to German carmakers, there are Porsche, Mercedes Benz, BMW, Audi and Volkswagen. And then there’s Opel.

Known for its safe, rather unexciting models, the slightly down-at-heel firm has long lived in the shadows of its much larger, showier rivals. But it received a much-needed financial and reputational boost last year when the French car giant PSA, owner of the Peugeot and Citröen brands, swooped in to buy it from US owner GM.

Hopes were high that Opel could ride again, and recreate its 1970s heyday, when its sports cars regularly swept the board at grand prix races. Those hopes have been short-lived, however, with a row breaking out over cutbacks at the loss-making firm.

According to a media report, plans are afoot to cut the workforce at Opel’s plant in Eisenach, eastern Germany, from 1,800 to 1,000, and in total more than 3,700 of Opel’s 19,000 workers in Germany may end up having to go – more than 20 percent of the total.

PSA has been ramping up the pressure on Opel to cut employee hours and boost efficiency to put an end to Opel’s 20-year run of losses.

German Chancellor Angela Merkel has sided with Opel over PSA, whose CEO Carlos Tavares is growing increasingly frustrated with the automaker’s chronic failure to turn a profit.

Ms. Merkel said she expected PSA to stand by the pledges Mr. Tavares made when PSA bought Opel and British sister company Vauxhall for €2.2 billion. “We now expect the company to keep everything it promised in connection with the takeover,” she said after a meeting with governors of eastern German states.

"The German government, along with the regional government here, feels obliged to do its bit to help," she said. "These discussions are ongoing but I can't say anything about the results yet.”

There’s a standoff in Eisenach, where trade union representatives have rejected wage concessions and layoffs demanded by PSA, prompting the French group to put planned investments for the production of a new SUV at the plant on hold. They were to have been approved this week.

Worker representatives are incensed. The chairman of engineering union IG Metall, Jörg Hofmann, told Handelsblatt he doubted whether Mr. Tavares has a strategy for Opel. “He’s a benchmark junkie but I haven’t heard a proper idea for Opel so far,” he said, adding that trust in PSA had been “seriously damaged.”

PSA has been ramping up the pressure on Opel to cut employee hours and boost efficiency to put an end to Opel’s 20-year run of losses. Handelsblatt learned from supervisory board sources in April that the firm is likely to have racked up more than €1 billion ($1.24 billion) in operational losses last year.

PSA gave assurances after buying Opel that it would restructure the firm without forced lay-offs and plant closures, But analysts believe tough cuts will be unavoidable. Unit sales fell 5 percent last year. In the first quarter of 2018, Opel’s and Vauxhall’s European market share shrank to 5.8 percent from 6.5 percent a year ago.

“Opel is rapidly losing market share and even sales in a growing market,” said Ferdinand Dudenhöffer, head of the Center Automotive Research at the University of Duisburg-Essen. “I think Opel will go on losing market share and sales at a significant pace in the coming 18 months.”

Opel’s problem is that it lacks attractive new models and its plants are inefficient, he said, adding that Opel “isn’t competitive” in Germany. He added that it was possible that Opel will have to shut down entire plants such as the one in Eisenach or in Kaiserslautern.

In an attempt to cut costs, Opel has cancelled its contracts with all 1,600 dealerships in Europe and summoned their representatives to its headquarters in Rüsselsheim for a meeting next week to discuss new terms, Handelsblatt has learned.

Franz Hubik covers renewable energy for Handelsblatt in Düsseldorf. Frank Specht is based at Handelsblatt's Berlin bureau, where he focuses on the German labor market and trade unions. To contact the authors: hubik@handelsblatt.com, specht@handelsblatt.com

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