Fear of GM Job Cuts in Europe German Government Considers Stake in Carmaker Opel

The German government is considering taking a stake in General Motors subsidiary Opel to prevent mass layoffs expected to be part of the American automobile giant's looming restructuring. Trade unions are calling for a spin-off, but the issue has sparked a political row.

The production line at Opel's modern plant in Eisenach, eastern Germany.

The production line at Opel's modern plant in Eisenach, eastern Germany.

Germany's political parties are embroiled in a row about whether the government should take a stake in carmaker Opel, which faces possible mass redundancies and plant closures under a global restructuring by its parent company General Motors due to be presented later on Tuesday.

The labor leaders of GM's European subsidiaries -- Opel, Vauxhall in Britain and Saab in Sweden -- on Monday demanded a spin-off of their brands rather than face what they called potentially fatal cost-cutting in Europe by GM.

"The spin-off of Opel/Vauxhall ... and the spin-off of Saab is the only reasonable and feasible option for General Motors which would not destroy the European operations and its European assets and could avoid lawsuits," said a statement on the labor force's Web site.

GM, recipient of a US government bailout, has a Tuesday deadline to present a plan to the US government on how it plans to remain viable.

"The current plan could include for the Opel/Vauxhall brand and the GM/Opel/Vauxhall subsidiaries mass dismissals and probably several plant closures. This would have disastrous consequences for the GM brands and companies in Europe and will finish them off," the statement said.

Germany Weighing Rescue Plan

Reports on Monday said the German federal government and several regional governments are considering acquiring a stake to shore up Opel.

German Deputy Chancellor and Foreign Minister Frank-Walter Steinmeier, the center-left Social Democratic Party's (SPD) nominee for the chancellorship in the September general election, didn't rule out a government stake to rescue Opel.

"I agree with the partners at Opel that we must review all options to save jobs at Opel in Europe and Germany," Steinmeier said on Monday.

German Finance Minister Peer Steinbrück stressed that the government could only provide short-term help.

Apart from a spin-off from GM and a government stake, other options being considered are state loan guarantees to keep the carmaker going.

Opel employs around 26,000 people in Germany at plants in Rüsselsheim, Bochum, Kaiserslautern and Eisenach. The potential job losses from plant closures are much higher than that if components suppliers are included.

Political Row

While politicians from the SPD and the opposition Greens said they were open to a possible state involvement in Opel, several prominent members of Chancellor Angela Merkel's conservative Christian Democrats (CDU) and of the opposition business-friendly, liberal Free Democrats (FDP) said they were strictly opposed to it.

"I'm strictly against the state taking a stake in Opel. What would we then do if Ford or BMW were to ask for help tomorrow?" asked CDU member of parliament Michael Fuchs.

Rainer Brüderle of the FDP, which shares power in the regional governments of North Rhine-Westphalia and Hesse, the states with the two biggest Opel plants, told Berliner Zeitung that it wasn't the government's job to build cars.

Opel started building cars in 1898 and the Opel family sold a majority stake to General Motors in 1929 during the world financial crisis. Now, with General Motors about to launch a restructuring which is widely expected to cause heavy job slashing in Europe, there are growing calls for it to return to German ownership.

The parliamentary leader of the Greens, Fritz Kuhn, called for a temporary government stake in Opel. "It would be tragic if an automotive dinosaur like GM would tear a modern company like Opel into the abyss," Kuhn told the Westdeutsche Allgemeine Zeitung newspaper. "If Opel continues the ecological modernization of its product range, the company will become competitive on its own."

Analysts Skeptical

However, several analysts said they doubted GM would agree to spin off Opel. "The businesses are very closely intertwined," said one auto analyst. In Rüsselsheim, for example, there are several thousand engineers responsible for the global development of models. Without GM, that developmeent center would have to be cut back severely.

Ferdinand Dudenhöfer, an economist at the University of Duisburg/Essen who specializes in the auto industry, said Opel would only be worth between €1 billion ($1.28 billion) and €3 billion ($3.8 billion) if it were separated from GM.

He told Berliner Zeitung that the German government had waited too long before responding to the problems at Opel/GM. "Legally, a spin-off could have happened swiftly if they had started preparing it sooner," Dudenhöfer said.

Separately, carmaker Daimler reported a steep drop in earnings for 2008 on Tuesday. Its net profit fell to €1.4 billion from €4 billion. Its operating profit, which fell to €2.7 billion from €8.7 billion, fell far short of average analysts' expectations for a figure of €4.4 billion.

Daimler blamed the drop mainly on costs resulting from its remaining 20 percent stake in US automaker Chrysler. Earnings from Mercedes car and truck sales also declined. Daimler declined to give a forecast for 2009 and announced a cost-cutting program involving curbs in wage hikes.

cro -- with wire reports


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