November 4, 2009 / 1:36 AM / 8 years ago

GM's U-turn on Opel sale angers Germany, Russia

<p>Workers leave the Opel plant after a shift change in Bochum early November 4, 2009. REUTERS/Ina Fassbender</p>

FRANKFURT/BERLIN (Reuters) - German and Russian leaders seethed and unions tore up a deal to cut costs in protest at General Motors’ “completely unacceptable” decision to keep Opel, its European unit, after months of talks.

Labor leader Klaus Franz rescinded hundreds of millions of euros in cost concessions that workers agreed to on condition that Opel was bought by Magna, the Russian-backed Canadian group long backed as buyer by Berlin and Moscow.

“General Motors’ behavior toward workers is completely unacceptable,” German Economy Minister Rainer Bruederle told reporters the morning after GM’s shock news, adding: “General Motors’ behavior toward Germany is completely unacceptable.”

In Moscow, Russian Prime Minister Vladimir Putin hinted the battle for carmaker Opel was not over, saying it was the German trust overseeing Opel, not the board of General Motors, which should decide any further steps.

Germany viewed Magna and Russian partner Sberbank as most likely to preserve as many German jobs and plants as possible. Half of Opel’s 50,000 staff are based in Germany.

“General Motors’ behavior shows the ugly face of turbo-capitalism,” said Juergen Ruettgers, premier of the state of North Rhine-Westphalia, home to an Opel plant in Bochum which is seen at risk of closure.

GM Europe will now revert to a reorganization plan that envisages chopping fixed costs at Opel by 30 percent, a spokeswoman said.

“Failure to reach the needed restructuring would result in the operation becoming insolvent, an unnecessary and undesirable outcome for all involved,” GM Europe said.

The spokeswoman declined to discuss potential job losses and plant closures, but German staff feared the worst.

NEW DEAL

“I don’t know what is going to happen here in Bochum if Magna does not take it over,” said one Opel worker arriving for an early shift at the plant.

In Spain, union spokesman Jose Juan Arceiz said workers would try to negotiate a deal with GM as they had with Magna.

British unions welcomed GM’s reversal.

“It is fantastic news for the UK and right that General Motors does not break up its family and instead retains ownership of (Opel sister brand) Vauxhall,” said Tony Woodley, joint general secretary of the Unite union.

GM abandoned the Opel sale on Tuesday, saying improving business conditions and the strategic importance of Opel had prompted the move by its board of directors.

The decision left open the question of how GM will finance its plan to restructure Opel, the backbone of its operations in Europe and a key source of global technology for mid-sized cars.

The spokeswoman said GM would repay the rest of a 1.5 billion euro ($2.2 billion) bridge loan due at the end of November if Berlin requested. The loan helped save Opel from being sucked into GM’s dip into bankruptcy this year.

GM Europe is counting on European loan guarantees to provide the bulk of the financing it needs to overhaul Opel.

Officials in Berlin, which had originally planned to provide 4.5 billion euros in upfront aid for the Russian-backed Magna bid, focused on getting back the bridge loan rather than providing fresh financing.

The Economy Ministry said Berlin would review prospects for state aid once GM presented its plans for Opel.

STATE AID

In Brussels, a spokesman for European Competition Commissioner Neelie Kroes noted the Commission’s role was only to verify any aid complied with EU rules, adding: “The Commission can’t force member states to give state aid.”

British Business Secretary Peter Mandelson said he wanted talks with GM to see how the new plan would affect jobs, including at its British Vauxhall plants.

Countries with Opel plants including Germany, Britain, Spain and Belgium were originally expected to provide aid for the rescue of loss-making Opel. GM said it expected restructuring Opel on its own would cost about 3 billion euros.

German officials who asked not to be named said the decision came as a total surprise to Chancellor Angela Merkel and her advisers during a visit to Washington, where Merkel addressed a joint session of Congress.

GM Chief Executive Fritz Henderson broke the news to her delegation during Merkel’s meeting in Washington with the heads of the World Bank and IMF shortly before she returned to Berlin.

Senior German officials said the Opel issue did not come up when Merkel met U.S. President Barack Obama on Tuesday.

Opel put the best face on its parent’s change of heart.

“The GM board of directors’ decision brings clarity for Opel/Vauxhall,” it said in a brief statement on Wednesday.

Labor leader Franz said workers would not go along with GM’s “blackmail” of European governments and staff. Protests were planned across Europe on Thursday.

For a graphic showing U.S. auto sales and the relative performance of auto stocks, click here: here

(Additional reporting by Reuters bureaus; Editing by Will Waterman and David Holmes)

$1=.6782 Euro

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