This Is Your Brain On Drugs Dept.: GM Wants To Announce Opel Plant Closure To Prop Up Obama

Bertel Schmitt
by Bertel Schmitt
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With their Washington overlords breathing down their necks, GM executives are pushing Opel for a definitive agreement to close Opel’s Bochum plant. According to the Wall Street Journal, GM “would like to be able to announce the plan before or along with its third-quarter earnings, which are expected to be disclosed Oct. 31.”

Keep smoking.

Says the Journal:

“The company, whose stock is languishing, would like to have an agreed-upon downsizing plan by then to signal to investors that it is moving aggressively to stem the financial losses at Opel.”

“Lifting the stock price ahead of November could have an impact on the presidential election that month. President Barack Obama backed a taxpayer funded bailout and bankruptcy restructuring of GM.”

Discounted by some commenters as a non-story, GM had bumped-up the date of its Q3 earnings announcement to occur before the November 6th election. Now, it needs good news to announce.

If GM plans to deliver the good news in a timely manner, it better get ready to pay a very high price. Plant closures and firings are contractually verboten at Opel through the end of 2014. Opel and its unions are in negotiations to extend this period through 2016. In that deal, the unions are supposed to agree to a delay of pay rises in exchange of two additional years of job security through 2016. According to Germany’s Automobil Produktion, this deal would save Opel between 40 and 50 million Euro yearly. Closing Bochum on the other hand could save GM $2 billion, Automobil Produktion says in a different article. Do you get a feeling for where the priorities are?

According to the same magazine, Opel’s works council chief Wolfgang Schäfer-Klug emphatically denies a report by Germany’s Frankfurter Allgemeine Zeitung that says that Opel is planning a reduction of 1,000 white collar jobs, 30 percent of the administrative workforce in Rüsselsheim. Opel needs a works council agreement for the plan, and it sounds like Opel won’t get it.

The unions are in an unassailable position. Jobs are secure through 2014, and can be made secure through 2016 if the unions forgo, or even defer a pay raise. After that, the ax will fall, workers will get up to $250,000 in severance, and then will be eligible for generous German unemployment benefits. It is doubtful that German metal workers will readily give up this position, only to advance Barack Obama’s odds in November. If they do, only for a very high price.

However, if you think that Opel will go on losing money just because Opel has lost money in the past 12 years, then GM’s head of European Operations, Steve Girsky, wants you to re-think that position.

Said Girsky to Bloomberg:

“You can’t have a mindset that it’s OK to lose a billion a year. That’s the mindset we’re trying to change.”

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Oldyak Oldyak on Sep 14, 2012

    Yes to all the above...? The longer that G.M. survives on the government teat the poorer we will all be. OUR government GAVE Chrysler to Fiat but at least they are making a go of it.

  • Billfrombuckhead Billfrombuckhead on Sep 14, 2012

    Since the bailout almost a 1/3 of all cars old in the US have been from GM and Chrysler. What would the rest of the auto industry have done to their prices if they didn't have that competition? What about the value of customers cars? What about all the lost jobs and the implications of that? What about favoring foreign state socilaist competitors vs our own companies and people? "The poorer we will all be", hardly.