German Chancellor Merkel will have to decide whether to follow job concessions with federal government aid.
Reluctant workers have agreed to give General Motors’ troubled Opel subsidiary more than $300 million in concessions, a move that could help free up millions more in bailout money from the German government.
Talks between Opel and its unions have been underway since GM’s European unit started slipping perilously towards insolvency, in early 2009, at the same time General Motors itself prepared to file Chapter 11.
In all, Opel says it won $332.5 million in givebacks from its workers, a deal that includes unspecified job cuts. A one-time payout to workers has been eliminated, and a 2.7% pay raise has been delayed. Workers also have agreed to reductions in holiday and Christmas bonuses.
Early on in the discussions, the automaker had discussed job cuts that some analysts forecast could run to more than 10,000. Opel and its sibling, British-based Vauxhall brands currently employ 48,000 workers, about half in Germany.
The bulk of the concessions come from IG Metall, the largest of the automaker’s unions and one of the most powerful labor bodies in Europe. In return, the automaker has agreed to give German workers a new small car to produce.
While the concessions should help, Opel is still struggling to pull together a reorganization plan that will require more investment by parent GM – as well as financial aid from European governments, most notably Germany.
The Berlin government offered some initial assistance, last year, but later demanded repayment after GM nixed the proposed sale of a controlling stake in its subsidiary to a Canadian-Russian consortium let by Toronto-based supplier Magna.
Opel CEO Nick Reilly recently requested $1.6 billion in a letter to Germany’s Economic Minister, Rainer Bruderle. Government officials confirm they are reviewing the request.
Earlier this month, GM reported an unexpected strong $865 million profit for the first quarter of 2010, but Opel was still in the red. The good news for the automaker was that the deficit by the European subsidiary shrank from $500 million during the fourth quarter of 2009 to just $300 million for the latest quarter.
(Click Here for more on GM’s first-quarter earnings.)