FRANKFURT (Reuters) - General Motors (GM.N) looks set for another bruising collision with the German government and labor unions after the U.S. automaker raised the prospect of further job cuts and plant closures at its ailing Opel subsidiary.
GM’s Chief Financial Officer Dan Ammann said on Wednesday no options were being ruled out in restructuring its European operations, catching Opel’s combative labor leader Klaus Franz by surprise.
The biggest drag on GM’s third-quarter results came from Europe, where the automaker posted a $300 million loss.
The Detroit-based group now expects a full-year loss in Europe, where a crippling sovereign debt crisis has sparked recession fears and hit demand for cars.
GM Chief Executive Dan Akerson, who voted against keeping Opel in the GM stable at a board meeting in 2009, described Europe as a “morass.”
“There is a danger that the losses will only get bigger,” said Juergen Pieper, an auto analyst from Metzler Bank who believes the carmaker with the lightning bolt logo will be loss-making next year and in 2013. “The question mark over Opel’s future remains.”
GM infuriated German Chancellor Angela Merkel’s government over two years ago when it abruptly reversed course and decided to hang on to Opel. Berlin had spent painstaking months cobbling together a deal to sell the group to Canada’s Magna International (MG.TO) and preserve jobs, only to see that fall through.
The bad blood has lingered, fueled as recently as June when German media reported that GM had changed its mind again and might sell Opel after all.
Franz, the German union boss, said he was “astonished” by the new threat of plant closures. He rejected them outright, saying GM’s current labor deal barred closures and factory job cuts through 2014.
Akerson, the former head of buyouts at private equity firm The Carlyle Group CYL.UL, is impatient and wants rapid capacity adjustments, but German politicians and union leaders work on a system of consensus-based decision-making that will make speedy cuts next to impossible.
The German system entails long-term job guarantees in exchange for union cooperation. The aim of the approach is to smooth out the bumps from short-term economic swings, but it also makes it more difficult to implement quick fix solutions in an industry sensitive to the cyclical economic shifts.
In a statement sent out on Thursday on behalf of Opel’s entire works council, Franz insisted that restructuring of Opel had run its course.
“According to statements and observations made by Opel Chief Executive Karl Friedrich Stracke, the restructuring of Opel in Europe has been successfully concluded. The contracts with a duration until at least end of 2014 rule out plant closures and job cuts. These contracts were approved by GM’s board of directors and are legally binding.”
Opel, headquartered in the German town of Ruesselsheim, has cut 8000 jobs since the beginning of 2010, but analysts doubt whether this will suffice.
Opel remains a high-cost player in a segment dogged by cut-throat competition from countries like Korea and is heavily exposed to Western Europe, a market vulnerable to a severe economic downturn as the euro zone crisis intensifies.
“Opel has shown that they are not yet on the right path. There will be a problem as long as the industry doesn’t adjust capacity,” said Reto Hess, who coordinates analysis of the global car industry at Credit Suisse Private Banking in Zurich.
“Europe is not really a growth market, partly because of the long-term demographics, and in the short-term the macroeconomic situation is not looking so good.”
Late last month, France’s PSA Peugeot Citroen (PEUP.PA), beset by gloom in European showrooms, warned its core car making business would barely make money this year and announced 6,000 job losses to cut costs.
Demand for cars has slipped this year and is likely to fall further. Europe’s ACEA car industry association said total new car registrations dipped 0.8 percent in Europe in the first nine months of the year.
DZ Bank analyst Michael Punzet said he expects demand for cars to fall by up to 5 percent in Western Europe in 2012.
“A big question is how markets will react to austerity measures,” Punzet said, referring to intensified budget cutting programs being implemented in Italy, France, Spain, Greece and Ireland.
Merkel, who faces a tough re-election fight in 2013, has been in constant crisis-fighting mode since Europe’s debt woes first erupted two years ago and will be loath to engage in another effort to save jobs at Opel with the entire currency bloc’s future at stake.
With all of Europe’s energy and resources focused on bailing out its weakest member states, there could be precious little left for Opel this time around.
Reporting By Edward Taylor, Jan Schwartz and Ludwig Burger; Editing by Noah Barkin and Chris Wickham