May 21, 2012 / 1:17 PM / 5 years ago

Future of German Opel plant uncertain after 2014

BOCHUM/BERLIN, Germany (Reuters) - The head of German carmaker Opel, under pressure from parent General Motors’ (GM.N) to end losses, refused to promise workers at its plant in Bochum that their jobs would be safeguarded beyond 2014.

The plant, located in the rust-belt Ruhr region devastated by coal mine closures, is expected to shut after the company chose to build the next generation of its popular Astra compact in Britain and Poland where wages are cheaper.

Unions say around 45,000 jobs are linked to the factory but a weak economy has hit car sales in Europe, forcing manufacturers to confront high fixed costs and a capacity overhang that GM says equates to 10 plants.

Germany has had few major plant closures in the last four years and a shut-down of Bochum could become an election issue in next year’s federal vote.

Workers had been hoping Opel chief executive officer Karl-Friedrich Stracke would shed light on the company’s plans but he said a mid-term business plan for GM’s European operations would not be submitted to the supervisory board until June 28.

“There is no decision for Bochum beyond 2014,” said Stracke.

Speculation that Bochum will close intensified after GM said last week that it would halt production of the Astra at Opel’s main plant in Ruesselsheim, Germany, making the car only in Britain’s Ellesmere Port and Gliwice in Poland.

German magazine Wirtschaftswoche reported on Sunday that Opel’s management had been preparing to shift production of the Zafira compact van from Bochum to Ruesselsheim to compensate for loss of the Astra, citing the works council.

Stracke denied that such preparations for Bochum, which has a production capacity of around 160,000 cars a year, had been made.

“Demand for Opel vehicles across Europe plunged 16 percent in the first three months of the year. That’s why GM will reduce capacities,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “I expect the Bochum factory to be shut down after 2014.”

HIGHER WAGES

Ellesmere Port won the Astra contract after workers agreed to a four-year pay deal including a two-year pay freeze, making wages cheaper for GM.

Opel workers also committed to cut labor costs in a 2010 restructuring but on Saturday Germany’s largest industrial union, IG Metall, agreed a 4.3 percent pay rise, its biggest in 20 years on Saturday.

The wage deal was seen as a sign that Germany was willing to tolerate higher wages even if that pushes up inflation.

The German economy has resisted the recession seen in some European countries but unemployment in Bochum stands at 10.2 percent, far higher than the national average of 7.0.

Bochum directly employs around 3,100 people but unions say the number of jobs connected to suppliers and other businesses are much higher.

Opel supplier Ernst Droeren GmbH & Co KG, which packages tires for the GM division, said business would suffer if GM were to close down the factory.

“Opel has always been and still is somewhat of an icon in this working-class environment,” said Ernst Ulrich Droeren, managing partner of the Bochum-based supplier. “Closure of the plant would be devastating for the regional economy.”

A shutdown of Bochum could have political ramifications in Germany where the future of Opel was a major theme in the run-up to the 2009 national elections.

The Social Democrats won a resounding victory on May 13 in North-Rhine Westphalia, the country’s most populous state where Bochum is located, and may seek to turn the plant’s future into a campaign issue for the 2013 federal vote.

Labor leaders have criticized Opel’s move to pull Astra production from Germany, saying it breaches promises management made to workers two years ago.

GM lost $747 million on its European operations last year, and rumors regularly surface that the U.S. carmaker may eventually throw in the towel and resume efforts to sell Opel. A previous move for a sale three years ago caused a public outcry in Germany.

Reporting by Matthias Inverardi and Andreas Cremer; Writing by Maria Sheahan; Editing by Erica Billingham

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