GM plans 10,000 job cuts at Opel

[Justin Bimmer]

BERLIN (AFP) – General Motors said Wednesday it wanted to cut around 10,000 jobs at its European division Opel a day after the US car maker stunned the auto sector by scrapping plans to sell the German-based unit.

GM wants to slash costs by 30 percent at Opel, which would mean the elimination of about 10,000 jobs from a workforce of 55,000, GM vice president John Smith told European journalists during a telephone news conference.

General Motors said Tuesday it was abandoning a project to sell Opel to Canadian auto parts manufacturer Magna International and state-owned Russian bank Sberbank, saying it would implement its own restructuring at the unit.

The decision sparked outrage in Germany, where half of Opel's workforce is employed and where the government had backed the Magna-Sberbank deal in hopes of preserving as many jobs as possible.

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Reaction was more subdued in Spain, Belgium, Poland, Austria and Britain, where GM also has Opel operations.

Smith acknowledged that "the German government had a very strong appetite for the Magna proposal, so I can well imagine and well understand" the German reaction.

"I am hopeful they will find merit in our plan."

Smith contended that there had been very little difference between the offers put forward by Magna and a rival bidder, the Belgian investment firm RHJI, and what GM has in mind for Opel.

"There is very little daylight between what RHJI proposed, what Magna proposed and what GM will propose," Smith said.

But he added: "We continue to believe that we can restructure Opel with less money than any other investor."

GM's decision to hold on to Opel came against an improving European economic backdrop but left open questions that could decide Opel's ultimate fate, such as whether its ability to build good compact cars is enough in a turbulent, crowded marketplace.

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Some German auto analysts said the decision made sense from an industrial viewpoint while others warned GM was making a huge bet as the sector came to a crossroads and as it pinned its hopes on electric cars and strategic alliances.

As GM struggled with bankruptcy, it initially agreed to sell a 55-percent stake in Opel and its British sister brand Vauxhall to Magna International and Sberbank.

But GM said in a statement Tuesday it would hold on to the European unit owing to "an improving business environment for GM over the past few months, and the importance of Opel/Vauxhall to GM's global strategy."

European auto sales have climbed in recent months, with small cars chalking up the most deliveries, but analysts warn the market will slump again next year as government support schemes are wound down.

Meanwhile, the global market for fuel-efficient models is expected to be stronger than for GM's classic gas-guzzlers. Bolstered by billions of dollars in state aid, it decided to keep Opel, a critical small-car asset.

"The strategic importance of Opel is enormous," Metzler Bank analyst Juergen Pieper told AFP.

But analyst Ferdinand Dudenhoeffer said GM "took the biggest risk possible."

US rival Chrysler made the same choice when it agreed to a takeover by the Italian group Fiat.

But Germany pushed for Opel's sale to Magna and Sberbank, and on Wednesday, Economy Minister Rainer Bruederle slammed GM's turnaround as "totally unacceptable."

Britain said it would work with GM to secure the future of British plants, while Polish Economy Minister Waldemar Pawlak quickly welcomed the GM decision, calling it good news for what he said was an efficient site there.

Russia and Spain expressed "surprise" at the news, with Moscow saying it would be checking to ensure the decision was legal.

Magna said it accepted GM's decision.

German Chancellor Angela Merkel returned Wednesday from a high-profile visit to Washington and headed into a cabinet meeting to discuss the news as Bruederle demanded details of how GM would restructure Opel.

Germany had spent months haggling with GM, the European Union and Magna over terms for 4.5 billion euros (6.6 dollars) in German state aid for the mooted sale.

Merkel's spokesman Ulrich Wilhelm said the chancellor would be in contact with US President Barack Obama in the next few days.

But the White House insisted it had nothing to do with GM's decision.

Britain called for talks with the US manufacturer.

"I have always said that if the right long-term sustainable solution is identified, then the government would be willing to support this," business minister Peter Mandelson said.