Page last updated at 15:07 GMT, Wednesday, 4 November 2009

German fury over GM Opel U-turn

Ellesmere Port staff react to the GM U-turn

General Motors' (GM) decision to hang on to its European car unit Opel, including Vauxhall, was welcomed in the UK but met with anger in Germany.

Unite union chief Tony Woodley, a former Vauxhall worker, hailed the news as a "fantastic decision".

But unions in Germany said workers would begin walk-outs from Thursday in protest at GM's decision.

The German government, which had backed the sale of Opel, demanded GM repayment of a 1.5bn euro ($2.2bn; £1.3bn) loan.

German leaders and labour unions had favoured a sale, to Canadian car parts maker Magna, as the best way to save German jobs as it included a guarantee that no German factory would be closed.

'Totally unacceptable'

"General Motors' behaviour shows the ugly face of turbo-capitalism," said Juergen Ruettgers, premier of the state of North Rhine-Westphalia, where there are fears that the Opel plant in Bochum could face closure.

ANALYSIS
Jorn Madslien
Jorn Madslien, business reporter, BBC News

General Motor's (GM) decision to keep Opel and Vauxhall rather than sell the two marques to Canadian parts maker Magna and Russian Sberbank, seems logical.

GM never really wanted to get rid of its European operations, fearing it would hamper its global competitiveness, in particular in Russia - which is expected to emerge as Europe's largest market over the next few decades.

But the American automotive giant was forced to agree to sell Opel and Vauxhall ahead of bankruptcy proceedings during the spring, as US taxpayers were loath to also bail out GM's foreign operations.

In Europe, Germany in particular had been prepared to dig deep into its pockets to ensure Opel's survival in the run-up to a general election in September.

Opel still needs large cash injections, though whether Germany will still be willing to deliver them now that election has been won is another matter - not least since any funds injected by European taxpayers at this point would help bolster a GM majority-owned by US taxpayers.

The German government has also responded angrily.

"We will get back taxpayers' money," German Economy Minister Rainer Bruederle said.

Mr Bruederle is attending a government meeting on Wednesday to discuss GM's decision and press it to reveal its new plans as soon as possible.

"The behaviour of General Motors towards Germany is totally unacceptable," he said.

"General Motors alone is responsible for this development. Only yesterday the workers signalled that they were prepared to consider wage sacrifice as a solution. It's up to General Motors to go back to the workers."

The German government had provided the 1.5bn-euro bridging loan to Opel to keep it afloat during the long, drawn out negotiations over the past few months to find a buyer.

GM first said in March that it wanted to offload Opel, which includes Vauxhall, when the US firm entered a period of bankruptcy protection that eventually saw it emerge with the US government as its biggest shareholder.

After months of negotiations, GM finally agreed to sell the brands to Magna in September, with the German government pledging Magna 3bn euros in loan guarantees on top of the existing bridging loan.

German strike action

Industrial union IG Metall said workers at Opel's four German plants would halt work - so-called "warning strikes" - on Thursday. Other plants in Europe would follow on Friday, it said.

Opel employs a total of 54,000 workers across Europe, with 25,000 based in Germany.

In the UK, its Vauxhall brand employs 5,500 people across two plants in Luton and Ellesmere Port.

Map of GM Europe's key operations

The decision to sell Opel to Magna had been controversial because of the German government's offer of the 4.5bn euros in loans.

The European Commission warned last month that Berlin's offer of this aid may breach European competition rules, although the German government immediately denied any wrongdoing.

But on Tuesday the US giant said it had now decided not to sell the business because of "an improving business environment for GM over the past few months", and would now be seeking aid for Opel from all the European states where it has operations, including Germany.

Peter Mandelson: "There will be a future for the Vauxhall plants in the UK"

The BBC's Berlin correspondent Steve Rosenberg said the decision was a "huge embarrassment" for Germany's recently re-elected Chancellor Angela Merkel.

"Her government had lobbied hard in support of the Canadian car parts supplier. The governor of the state of Hesse, where Opel has its headquarters, also said he was 'shocked and angry'."

Russian Prime Minister Vladmir Putin also waded into the row, saying he was "surprised" by the decision.

State-owned Sberbank, the country's largest lender, was to have backed the Magna takeover.

"According to our information the Magna-Sberbank consortium is intending to carry out discussions with General Motors very soon and carry out a deep legal analysis of the situation," Mr Putin's spokesman added.

'We know them'

Mr Woodley told the BBC that GM's news was an "incredible turnaround".

german factor
Workers at this Opel factory in Eisenach, Germany may go on strike

"The decision is in my view a fantastic decision and the right decision for General Motors themselves," he said.

"There's no logic in breaking up the company. I believe it is the right decision in spite of a good deal that we'd struck with Magna."

However, some workers arriving this morning at Ellesmere Port, where they make the Astra model, were less than enthusiastic about the latest twist in the saga over GM's European operations.

"Hopefully it's good news but there are no guarantees," one employee told the BBC. "Whoever was going to own us, there's still going to be cutbacks."

Business Secretary Lord Mandelson he was keen for "very early discussions" with GM over how their plans affect its British workers.

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

Unite, the main union at Vauxhall, last month reached a deal with Magna to limit job cuts at the two factories to just 600 people, and all through voluntary redundancy.

John Featherstone, Unite's convenor at Ellesmere Port, said he believed there would still be some restructuring in the UK, "but I am pleased we will be dealing with GM because we know them and we understand their culture - and they know us".



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