Opel’s Supervisory Board, with half of its members delegates of the labor union, decided today the first closure of a German car factory in decades. According to Reuters, “Opel will end producing Zafira MPVs at its 50-year old Bochum plant by the end of next year, a move that has triggered a rare and public split within union ranks following months of tough negotiations.”
The closure will lead to the loss of 3,000 jobs in Bochum, as part of Opel’s attempt to put an end to 15 straight years of losses in Europe. It will be a while.
The Bochum plant makes the Zafira, and the current model will be produced through 2016. Where that will happen after 2014 is anybody’s guess. Opel’s works council in Bochum was betting that GM would not want to shift production before the model change and voted against a compromise deal that would have kept the plant running through the end of the model’s life-cycle. Workers in other Opel plants supported the deal that had been worked out between unions and management.
According to Reuters, “labor leaders in Bochum, a former coal mining town in the economically depressed Ruhr region, believe colleagues at Opel’s other three German plants were all too willing to sacrifice Bochum in order to save their own factories.”
The board decision was pre-ordained. According to German rules, if the board is split, the Chairman can cast a tie-breaker vote. The Chairman of Opel’s Supervisory Board is Steve Girsky. By casting two votes, he sealed the fate of the Bochum factory.
However, Girsky’s tough line will become very costly for GM. Under normal circumstances, closing a European plant even with the cooperation of the unions does not come cheap. As the examples of Antwerp and Genk show, average severance payments of $200,000 and higher are normal, depending on the age of the workforce. “There won’t be a deal for less than $200,000 per head,” the CEO of a company in the region told Wirtschaftswoche.
In the case of Bochum, the works council opposes the closure, which could mean a drawn-out and costly legal battle and even higher severance payments. Works council chief Walter Einenkel; already threatened “a multi-year, politically and financially expensive affair, which will dominate the public discussion for years to come,” and damage the Opel brand even more.
It will be a very long time until the savings from closing Opel will be realized. Or, as Einenkel predicted, “for Opel the most expensive closure of all times.”
There is one way around it: Bankruptcy. Opel AG is a standalone company that just happens to be majority-owned by GM. If someone issues a Do Not Resuscitate order and takes Opel off GM’s money drip, bankruptcy would follow in due course. Word has gotten around in Europe that there is too much capacity, and shedding it via a GM-owned Opel would not be entirely unwelcome. Except among the Opel workers.