General Motors’ strategy to return its lossmaking European arm to profitability is likely to fall short and its Opel unit risks exhausting a loan facility granted by the US parent, the head of Europe’s most powerful trade union has warned.
Berthold Huber, the head of Germany’s IG Metall union, which is closely involved in Opel’s restructuring talks, said that the mid-term business plan approved by Opel’s board last month “won’t be sufficient” to end the losses.
“We need to have good products, productive factories and work out what steps we need to take to get there. And with what’s been proposed up till now, it will probably not work.”
“There has been such a drop in the market in Europe that if Opel doesn’t do anything, the loans provided by GM could be breached. GM can’t allow that to happen,” he added.
Mr Huber spoke to the Financial Times last week, one day before GM ousted Karl-Friedrich Stracke as chief executive of its European arm.
The Detroit carmaker declined to comment on Sunday on his remarks.
Opel is one of a clutch of European mass-market carmakers struggling with falling sales and too much production capacity. These have triggered a price war in Europe and eroded cash reserves.
Opel’s sales fell 11 per cent from January to May in a European market that was down 8 per cent. GM lost $747m before tax in Europe in 2011.
GM set up a €2.6bn intracompany loan facility in 2010 as part of a funding package to help Opel/Vauxhall’s restructuring and ongoing cash requirements.
It is not clear if this is the loan facility reffered to by Mr Huber or whether the loan has since been modified. A source close to the talks put the size of Opel’s credit facility at between €2bn and €2.5bn.
GM/Opel declined to comment.
Opel’s supervisory board is set to meet on Tuesday to appoint an acting chief executive for Opel/Vauxhall, according to company sources. Thomas Sedran, an Opel executive with restructuring expertise, is among those tipped for the job.
Steven Girsky, a US GM executive and Opel’s current supervisory board chairman, has been appointed to lead the larger GM Europe operation on a temporary basis.
Mr Girsky signed off on a business plan last month designed to help return Opel to profitability by 2016. The plan stops short of mandating plant closures or compulsory redundancies in contrast to rival PSA Peugeot Citroën, which last week said it would close a plant near Paris and axe 6,500 jobs.
Instead, Opel’s current strategy focuses on investments in new vehicles, reducing material and production costs and exploiting synergies with Peugeot, its new alliance partner.
Trade unions and management are in separate, ongoing talks on a deal that would prevent redundancies and the closure of a car plant in Bochum until after 2016.
He conceded, however that, “of course there’s a difficult future if [Opel] cannot return to profitability. And there’s no real answer coming from Detroit or elsewhere”.