Trying To Sort Through The Opel Mess: It’s A Pre-Programmed Crash

I have been trying to make heads or tails out of yesterday's contradicting news about the big deal between Opel and the unions, and so does German media. So much is clear: The truth and GM's press release about a "successful conclusion" of the negotiations with the Opel works council are miles apart. There is no deal. Unions and Management are still in negotiations, the negotiations will continue this coming week. Then, the workers have to vote. It does not look good: Bochum's works council is dead set against the deal. It gets worse. Bochum's works council chief Rainer Einenkel tells Handelsblatt that he "does not agree" to the deal. He characterizes his negotiations with management as "very brief." He says that management told him that there is "nothing to discuss," and that Bochum either says yes, or jobs will be imperiled from 2015 on. Einenkel did not want to sign on to what appears to be on the table: Opel continues building cars in Bochum, at least through 2016 The Bochum auto plant will be converted into a component and logistic hub for a total of 1,200 jobs or more. Opel attempts to settle new companies and technologies in Bochum, and expects "a four-digit number of high-quality, new industrial jobs." Bochum goes from three shifts to two, at the expense of 700 jobs, starting in the second quarter of 2913. Affected workers will receive "attractive severance packages and partial retirement programs." Production and jobs at the other three German plants in Eisenach, Kaiserslautern and Rüsselsheim are safe. And what woukd the concessions of the unions be? The payout of salary increases under the collective bargaining system is deferred until the next salary increase goes in effect. The last "concession" makes you wonder how bad the situation really is at Opel. Management, had tied its hands before and agreed to keep plants open through 2014. Now it puts itself into handcuffs and agrees to keep the doors open and the lights on in Germany through pretty much the end of the decade? And the price for that is what? A contractual pay raise on credit? How much are we talking about? Let's check. Last October Opel owed its German workers some $15 million due to a 4.3 percent pay hike negotiated for all IG Metall workers in May. That money was paid in November. The next contractual pay hike is due this May. Then, another $15 million are due. After that, the workers will get their extra 4.5 percent monthly, and whatever the next raise is will be loaned to Opel for another year. Let's call that $30 million, or three years of Akerson's salary. Is Opel so hard up for money that it has to bargain away its ability to make serious adjustments of its capacity for what looks like a payday loan? Remember: These are not salary concessions. Instead of getting paid monthly, it's paid by the end of the year. And it's not that the bleeding will stop. Those 700 jobs of the third shift? They will be very expensive to make go away. Let me again kill a myth. It is not impossible to close a factory in Europe. Not at all, if you have the money. You can close factories to your heart's content. You can't fire the people. If you do, it costs you. A lot. The closure of Ford's Genk factory was estimated at $1.4 billion, or $332,000 per worker. Ford allocated money, the matter went down with a minimum of fuss. When GM closed its Antwerp facility, it did cost GM around $532 million in termination benefits. Divided by 2,600 workers, it came out to a little bit over $200,000 per worker. How much do you think those "attractive severance packages" for the third Bochum shift will be if there is a contract that says that their jobs are safe through 2014? How much will it cost to shift 1,000 workers into those mythical "high-quality, new industrial jobs?" The workers aren't stupid. Every year they worked at Opel is worth serious money in severance when they get fired. Close to retirement, very serious money. They won't give it up for nothing. You will have to pay them – a lot – to take those high quality jobs. Ford did the right thing. It bit the bullet, paid, and moves on. GM on the other hand … Opel and GM strike me at someone who refinances to a few bucks of a lower payment, but with a much bigger balloon a few years down the road. There is only one way to escape the inevitable: Take Opel bankrupt. The more problems are being kicked down the road, the more attractive and likely a bankruptcy will get.  Today is Karl-Thomas Neumann's first day on the job as Opel CEO and chief of GM Europe. Germany's news channel N-TV greets him with the headline: "The Opel Adventure Begins: Neumann Takes The Ejection Seat." from The Truth About Cars http://www.thetruthaboutcars.com

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