GM is counting on new products like this Opel Adam -- and cost-cutting -- to help it reverse 13 years of European losses.
IG Metall, the powerful German metalworkers union, has agreed to a pay freeze for 20,000 union members employed by Adam AG Opel, General Motors’ principal European subsidiary. The move could be a critical next in the long-sought turnaround plan for GM which has suffered 13 years of worsening losses in Europe.
In exchange for the pay freeze, the automaker has agreed to hold off on layoffs and will continue operating a plant in Bochum, Germany that was slated to close permanently.
German pay increases, put on hold in November as part of the negotiation process, will be postponed through 2015, the Ruesselsheim-based unit said in a statement today. GM will refrain from forced firings through 2016 as part of the deal, according to a statement posted on the German union’s web site.
“The stated goal is…to improve the market position of Opel and to solve the serious economic situation at Opel,” the union said in about the tentative agreement dubbed “Drive 2022.”
While GM has not provided specific details of the deal it appears to have allowed for further cuts in employment through voluntary severance packages.
By agreeing to keep part of the Bochum complex GM backed away from a threat to close the plant at the end of next year. The decision will secure about 1,200 of the location’s more than 3,000 jobs.
GM Europe, which includes Opel and Vauxhall, has lost $18 billion since 1999, including a $1.8 billion deficit last year. GM recently said it had reason to believe it will improve earnings this year with the help of new models such as the the Mokka and Adam, and to break even by 2015.
GM employs 40,000 people in Europe, including 22,000 in Germany.
“General Motors fully supports Opel and is securing the necessary financing for the coming years, until we can once again return to profitability,” GM vice chairman Steve Girsky said in a statement.
Girsky had pressed for a labor agreement before former Volkswagen executive Karl-Thomas Neumann takes over as Opel chief to lead the turnaround. Girsky, who is a former Wall Street analyst and now GM’s vice chairman, will also hand over his role at the Detroit-based carmaker’s European business to Neumann.
European deliveries by Opel and Vauxhall plunged 16% last year to 834,790 vehicles, almost double the overall 7.8% industry-wide contraction in the troubled Continental market. The brands have a target of keeping their European market share stable this year after a drop to 6.7% in 2012 from 7.3% in 2011.
The latest agreement follows a pattern in which German unions have been willing to give up wages for job guarantees and protection. The agreement also follows the pattern set by the United Auto Workers in its bargaining with GM in the U.S. two years ago.