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Cablegate: Gm/Opel Job Cuts, Labor Unrest, and Plant Closures

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 FRANKFURT 008977

SIPDIS

SENSITIVE

DEPARTMENT ALSO FOR DRL/IL
USDOC FOR COMMERCIAL SERVICE
USDOL FOR ILAB*BRUMFIELD

E.O. 12958: N/A
TAGS: ECON ELAB EIND GM
SUBJECT: GM/OPEL JOB CUTS, LABOR UNREST, AND PLANT CLOSURES
ON THE HORIZON

REF: A. A) FRANKFURT 6238

B. B) 03 FRANKFURT 7910

Sensitive but unclassified -- not for internet distribution.
Contains business-proprietary information.

1. (SBU) SUMMARY: General Motors has announced plans for
massive job cuts and future plant closures at European
subsidiary Opel, sparking labor unrest, including a wildcat
strike at the Opel plant in Bochum beginning October 14, and
reactions from federal and state ministers. The Hesse state
government expressed public concern over the future of Opel's
flagship plant in Ruesselsheim (outside Frankfurt) but made
no move to offer a rescue package. For his part, Federal
Minister of Economics and Labor, Wolfgang Clement, urged
workers at the Bochum plant to return to work. However, he
ruled out any direct federal government support for Opel.
Opel works council and management opened talks at
Ruesselsheim October 18. The announced plans at the second
largest U.S. investment in Germany comes days after
announcements regarding plans by Europe's largest retailer
-) Karstadt Quelle -- to lay off as many as 3,000 German
employees in the coming year. In private conversations, Opel
management and labor figures note the larger picture issue of
continuing stagnant German and European demand for mid-range
cars. END SUMMARY.

2. (SBU) On October 13, GM Europe announced plans to
eliminate 12,000 jobs in the firm's factories, including
10,000 of Opel's 32,000 jobs in Germany by the end of 2005,
citing the high costs of doing business in Germany. GM
Europe President (and former Opel CEO) Carl-Peter Forster was
quoted saying that if Opel produced in Germany at the same
wage levels as in France, the company would improve its
bottom line by over 500 million euros annually (NOTE: GM
Europe posted a $470 million operating loss in 2003. END
NOTE). GM Europe Chairman Fritz Henderson said the company's
multi-year losses in Europe are beyond any precedent and that
it must make radical cuts without harming customers (i.e.,
make cuts in production and research divisions).

3. (SBU) Opel workers reacted strongly. Protesting the
planned job cuts, workers at Opel's Bochum plant have engaged
in what amounts to a wildcat strike since October 14. The
plant works council announced that the stoppages would
continue until company management guarantees there will be no
lay-offs for operational reasons, no plant closures, and no
outsourcing of production. A European-wide action day is
planned for Tuesday, October 19, to protest GM plans to lay
off 12,000 workers at its European plants. In the meantime,
Opel's works council and management opened talks at
Ruesselheim, one of Opel's four German production sites.

4. (SBU) In a September meeting with EMIN, Opel Works Council
chairman Klaus Franz (who represents Opel's 32,000 employees
in Germany and serves as deputy supervisory board chairman
and a member of GM's European works council) criticized GM
managers in Detroit as pitting European plants against each
other. Franz said that GM is repeating the mistakes of the
1990s, destroying improvements in quality and image, reneging
on agreements between the works council and plant management,
and running morale into the ground. Franz also noted he is in
daily contact with his counterpart at GM's Trollhatten
facility in an effort to keep the German and Swedish plants
afloat. Nevertheless, Franz stated Germany needs to pursue
economic reforms -- an area where he disagrees with the IG
Metall leadership -- and that Germany's high wage costs are
damaging the country's international competitiveness. He
noted as well a long-standing problem with overcapacity in
Ruesselsheim and other Opel facilities.

5. (SBU) Frank Klaas, General Director of Communications at
Adam Opel AG, told EMIN that Russelsheim has long operated at
no more than 70% capacity. He blamed continuing soft demand
levels in Germany and the rest of the EU as a major factor
for this situation. Whereas in 1994 Germans bought a new car
every 3)4 years, today they purchase one every 7)8 years.
The weak economy, uncertainty over the course of Berlin's
economic reforms and new environmental measures, both real
and potential, and fears of rising unemployment all deter
German car buyers. Germany's corporate tax levels and rising
costs of energy used in producing cars are problems as well.
Klaas argued the unions are out of date with market realities
and do not see the need to cut wages. Opel, as a producer of
mid-range cars, is in the same straits as Ford Germany and VW.

6. (U) In a visit to the protesting workers on Sunday,
Federal Economics and Labor Minister Wolfgang Clement had
urged them to return to work, calling their action
"understandable, but not useful for a meaningful solution."
He urged Opel management and works council to begin talks on
a joint rescue plan, but he ruled out any direct federal
government support for Opel's recovery, including an active
government role in the negotiations. Hesse Economics
Minister Alois Rhiel (CDU/Christian Democrats) called GM
Europe's announcement "alarming" and praised Ruesselsheim's
modern technology, highly qualified workforce and optimal
transportation infrastructure. In media statements, Hesse
Minister-President Roland Koch (CDU) called on employees and
management in Ruesselsheim to agree on wage cuts in order to
protect jobs. He cautioned Swedish authorities not to
support the Trollhattan plant with subsidies and said Hesse
would challenge such a strategy at the European level. While
affirming Opel's strategic importance for the Hesse economy
and the need to "save what can be saved," M-P Koch made no
concrete offer to support operations in Ruesselsheim.
BODDE

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