By on May 22, 2010

Opel has received a new lease on life. Nobody knows how long the lease will last, but Opel is an important step ahead and gained an even more important ally in its beggathon for state aid. Opel cut a deal with its unions, led by labor leader Klaus Franz.

“For much of the past year, Klaus Franz has been a thorn in General Motors Co.’s side,” wrote the Wall Street Journal. Franz “has blamed the European car unit’s troubles on its American parent, saying GM was ‘filled with yes-men’ and that it had a ‘centralized planning system worse than in East Germany.’ Now, GM needs to make nice with Mr. Franz.” With their backs to the wall, GM finally paid the price and made nice.

The unions agreed to the salary concessions of €265m ($333m) annually that Nick Reilly urgently needs. Over 4 years, that’s more that €1b. The unions also agreed to shedding 8,300 of the 48,000 Opel jobs in Europe, reports Automobilwoche [sub].

In return, the unions received painful concessions. Investments of €11b into new products. Development of a smaller car than the Corsa. All Opel plants except Antwerp remain open. Probably most contentious concession: The Opel GmbH will be converted into an Opel AG. According to German law, an AG has much higher independence from its shareholders. The management of a GmbH must act by direction of the shareholder (GM). In an AG, the management proposes actions to the supervisory board. The board can say “yes” or “no.” But the board cannot order management around. The unions will have half of the seats on the supervisory board, along with seats on the management board. Nothing goes without the unions on board. Managing Opel jointly with the unions was something Reilly and GM were trying to stay clear of like the devil avoiding the holy water.

As far as winning an ally goes, Opel labor Chief Klaus Franz immediately asked the German government to support Opel. His line of reasoning is hard to ignore in Berlin: “If the workers are convinced and ready to invest more than a billion Euro, then we ask the government to at least provide similar loan guarantees.”

Despite the deal, Opel needs money more urgently than ever. Opel won’t see a dime of the savings. They have to spend the money, it goes into an escrow account, and it will sit there until 2014. If only one clause in the deal has been broken, the workers will get their money back, plus interest.

Even if the government listens to the compelling arguments of the unions and says “ja”  to the loan guarantees, there’s always Brussels.

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6 Comments on “It’s A Miracle: Opel And Unions Cut A Deal...”

  • avatar

    This won’t end well. Unions typically don’t care about the business beyond preserving jobs in the short-term.

  • avatar

    I think these guys (both sides) realized that as it was developing, it was a lose-lose situation.

    It’s a positive sign. But still, ma-GM should give the money to support Opel

  • avatar

    Correct me if I am wrong but isn’t there multitude of large companies in Germany where unions sit on the board and have an important say in the direction and management? And yet German companies are doing as well as ever in the world of commerce. So I don’t see why this arrangement is doomed to fail. It may still fail but not necessarily because German labor has a say in it.

  • avatar

    @ ra_pro: Of course, you are right. If there are no idiots at work at the top level it will work fine. Simply look at Volkswagen and their subsidiaries/affiliates. Beware of the inherent business risks, however.

  • avatar

    So it sounds like GM got the job cuts it proposed and the plant closing in Antwerp. It will be interesting to see how the management chain goes with the new Opel AG. My understanding though, this doesn’t involve the Chevy side of the business in Europe?

    Looks like Opel is going to survive after all, and I am betting that it will receive the funding from the Gov’ts in Europe to do so.

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