US embassy cable - 04FRANKFURT8977

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