By on November 9, 2011

From his dream of a UAW-represented VW plant in Tennessee (ha!) to his desire for a seat on the boards of the Detroit automakers (double ha!), UAW President Bob King has a way of idealizing the German unions. And no wonder: while the UAW spent decades fostering a radical sense of entitlement, German works councils entwined themselves with their respective employers, earning places of power among the world’s largest automakers. But unions are a delicate balancing act in every country and culture, and even Germany’s unions, widely hailed as the example for the industry, can run into trouble.

Last time it was Volkswagen’s powerhouse works council, which erupted in a scandal over VW-funded sex tourism (with free Viagra and shopping trips for the wives!) back in 2005. With Opel’s union boss, Klaus Franz, becoming caught up in his own (slightly less lurid) scandal, GM’s acknowledgment that more cuts could be coming for Opel could prove just as explosive for the German works council model.

First, some background: GM Europe is not doing all that well, and Opel is big part of the problem. As the chart above (from GM’s Q3 financials release [PDF]) shows, an upward sales trend over the previous three quarters came to an end in the third quarter, and GM downgraded its entire Q4 outlook due to “continued weakness in Europe” and the fact that

ME will not reach target of breakeven EBIT- Adj. before restructuring charges due to declining economic conditions

As a result, GM CFO Dan Amman told the Q3 conference call

We’ve got to get the break-even point lower and the profitability higher… we are not betting on any improvement in the macroeconomic outlook in Europe.

And when asked if “getting the break-even point lower” might involve a few job cuts, Amman answered

We’re not going to rule anything out, we have to look at the whole picture

The Financial Times‘ headline “GM eyes further European cuts” came as something of a rude shock for Opel’s works council boss Klaus Franz, as the Economic Times reports

Opel labor leader Klaus Franz said he was “astonished” by the threat of a potential plant closing, saying GM’s current labor deal barred closures and factory job cuts through 2014.

In fact, GM Europe’s bad news came just as Franz was pushing for more assembly jobs in Europe, telling Reuters

GM would like to have the subcompact (Agila) produced in South Korea. Instead, we will fight to have it built in Gliwice (Poland), starting in late 2014… We are making the case for assembling the next generation of the Antara in Bochum (Germany) together with the Chevrolet Captiva, since it is based on the compact high-roof architecture.

This would be bad news for Franz under any circumstances: more cuts when you’re asking for more jobs is a bitter pill for any union boss. But because he’s under serious fire from within his union’s ranks in the aftermath of  a payola scandal, the prospect of cuts is even more terrifying. The World Socialist Web Site sums up the gist of the problem with a single “coincidence” reported by the Frankfurter Allgemeine:

The monthly allowance for the Opel works council was last increased in the autumn of last year. At that time, the allowance for an “ordinary” works council member was increased from €276 to €300. Shortly before, in August, the council had undersigned a deal for the elimination of the jobs of 20 percent of the workforce in Europe and large wage cuts for those retaining their jobs.

At a time when ordinary Opel workers are expected to accept massive wage reductions, the salaries of their union representatives are hiked. The increase in the subsidy for works council members was a bonus for the successful reduction in wages for the rest of the workforce.

Even with workers being offered $360,000 to leave their positions, headcount reductions at Bochum were painful. With Opel’s works council under investigation, and with Franz losing credibility as a representative of the workers’ interests, the next round of cuts will be twice as painful… especially with the wider European economic drama still unfolding. No wonder Franz recently went as far as to try to goad GM to selling Opel to its Chinese partner, SAIC.

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One Comment on “Opel: With Cuts Possible, Union Boss Faces Heat...”

  • avatar

    It is always astonishing to realize that, contrary to the UAW’s little red book of quotations, the most highly compensated/insulated unions and the best performing car companies are not highly correlated.

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