By on March 18, 2011

Last year, GM’s German patient, Opel, hemorrhaged $1.6 billion. It could easily have been twice than that, if Nick Reilly had fired the more than 8,000 workers that are on Opel’s endangered species list. Letting people go can get very expensive in Europe if you are a going concern. The only factory that was closed was Antwerp, to the tune of $532 million. That came to a little bit over $200,000 per worker. Reilly didn’t want to rain on the IPO roadshow, and moved the mass firings to this year. GM’s thank you: Reilly was fired.

Well, not quite. According to Reuters, Nick Reilly retains the (mostly ceremonial) title of Head of European Operations at GM, and he will be named Chairman of the Opel supervisory board.

The man who’s calling the shots at Opel is the German Karl-Friedrich Stracke. Stracke is an engineer, and an Opel lifer. He started there in 1979. Since 2009, he was head of global R&D at GM. According to Automobilwoche [sub], Stracke is “a master organizer and well versed on both sides of the Atlantic.” His new job will most likely be the biggest challenge of his life.

In America, GM CEO Dan Akerson is getting impatient. He wants the hemorrhage to stop. The problem is, it won’t stop without a huge bloodletting. According to German media reports, Akerson “put the gun to Stracke’s head” and demanded 1,200 workers at the Bochum plant to be gone by May, something Opel denies.

In Bochum, nobody wants to go. Offers of up to $363,000 in golden parachutes found no takers. Even offers to move from not quite picturesque Bochum to Rüsselsheim (not on Germany’s romantic route either) were not accepted – despite an extra payment of $35,000. The workers in Bochum are digging in for more.

When the 1,200 workers in Bochum have been disposed of in an environmentally responsible fashion, the work will not be done. Not at all. 4,800 jobs have to go in Germany, 8,000 in Europe. It won’t come cheap.

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12 Comments on “GM’s German Patient: No More Mr. Nice Guy...”

  • avatar

    The most chilling words in this report are “Dan Akerson is getting impatient”. This may be where we see the accuracy of Mr. DeLorenzo’s assessment.

  • avatar

    “Letting people go can get very expensive in Europe if you are a going concern.”
    GM should have gone through a real bankruptcy.

    • 0 avatar

      That would have been interesting.
      Opel was, at the end, being used as secured collateral and one of the few parts of GM worth something.  Had GM gone through a “normal” bankruptcy Opel would have been off the table and (wait for it!) it would have been another reason why the company would have seen sold for parts to the Chinese and the bondholders would have gotten much much less than they did.
      There’s a lot of people who cried about GM not going through a real bankruptcy who would be singing a very different tune had that been the case.

    • 0 avatar

      In a real bankruptcy the secured and senior creditors / bondholders would own GM.  They would be able to cancel any contract, lease; fire any workers union included.  They would be the ones getting all the money if THEY sold it to the Chinese.

      GM would have no debt, since the new owners (creditors) would not owe themselves. There was no need for government loans. No creditors were paid a single penny with that money. In this case the various governments “LOANED” money to GM then use it as a guise to step in front of the other real creditors. It was not to save GM. It was to save their political allies.

      GM asked for those government “loans”, to save their jobs from the creditors axe. In the real world, the government could not step in front of earlier creditors without their permission. Debt agreements have these common clauses. That is the whole legal basis for seniority and security liens. Those laws are gone now if you loan money to a politically protected class.

      The sad part is; try borrowing money in the future. Who will loan GM money other than government? Debt agreements no longer mean anything if the borrower is politically connected.

    • 0 avatar

      In a real bankruptcy the secured and senior creditors / bondholders would own GM.

      Partly correct.  Creditors would own the company. Bondholders (at GM) are well back of secured creditors and aren’t guaranteed anything

      The chief secured creditor, by the way, was the American government, followed by the governments of Canada and Ontario.  Recall that GM asked them for a loan.  It would have been very bad policy for the government to go through a “real bankruptcy” and hock GM’s few assets piecemeal for fractions of a penny on the dollar, which was what they would have gotten in the middle of a credit crisis when the banks weren’t going to loan anyone anything, least of all loan anyone anything to buy up a useful stake in a basketcase like GM.

    • 0 avatar

      The various governments, even though they were the last creditor in the door, claimed they could act as if they were the first creditor in the door.
      And people wonder why Facebook raised $1.5 Billion in new private capital recently; and the investment offering was available to anyone who was not an American or American based entity.  Clearly, someone does not trust the US Government or the rule of law as it exists.

    • 0 avatar

      I wouldn’t say that the Facebook deal was because someone doesn’t “trust” the U.S. government. Gold Mansacks did that one on behalf of Facebook; they wanted to raise a lot of investment without actually having to make public the information on FB’s finances. By US law, they need to release this information if a company has more than 500 different investors; by not allowing Americans to invest, GS thinks that they can get away without getting sued (we’ll see!)

  • avatar

    difficulty is that in Europe union leaders are not for sale like the United Against Workers led by Bob the VEBA King.

  • avatar

    As anyone who has dealt with a European labor union or working council (essentially the same thing for non-unionized multinationals operating in the EU) can attest, GM has only got bad and worse options in this situation.

  • avatar

    The mantra should be to find a way to use this manufacturing capacity, not retreat.     Currencies, oil, and other external factors can change quickly.    What is considered a boat anchor today may be your future rocket ship.    
    Perhaps a better plan is to first put everyone to work in a super lean environment.
    Reduce hours, negotiate for cross-functional roles, and make lean thinking their job survival.
    Tighten up work rules and regularly discharge poor performers. (not on a large scale, just enough to get the message across)

    Shift people around to more productive roles.  They may even be able to do some non-manufacturing work for other GM groups in such as design, sourcing, testing, customer service, and other functions. 

    I would take buy-outs off the table and make the alternative option plant closure.
    Normal attrition (here and globally) should be the process to adjust for over capacity and improved efficiency.    

    Have this group leverage off global platforms and manufacture a mix of Euro region sales and export sales.   The Buick Regal is a good example of a product that can keep the Opel operations busy to mark time while they develop and implement their strategy to have sales meet their manufacturing capacity.

  • avatar

    Germany is a long way from the action in China and Vauxhall and Opel badges stick to anything just like Chevy, Buick Caddy do. Korea is central and a lot more user friendly Hyundai seems to do ok. The Russians are buying used car companies right now but be in qwik you gotta a handy site in Germany.

  • avatar

    According to an interview to Dan Akerson, recently published on a europena newspaper, he said that “it was a good thing we didn’t sell Opel”.
    Care to elaborate on that, Mr Akerson? Truth is, GM should rebadge everything in Europe to Chevrolet, or just come up with an entirely new brand (scion for example), slowly deplete Opel lineup and pass it over to the new brands, and then close Opel alltogether. Opel has way too much production capacity in Europe, but they are in denial about the necessity to close factories and letting people go. I would just keeo the R&D and design studio open, as that is a good policy and allows GM to keep tabs on european specifuc taste, but everthing else is really not necessary.

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