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GM & Opel Unit: Anger And Confusion Over GM's Decision Not To Sell European Operation

GEIR MOULSON   11/ 4/09 11:48 PM ET   AP

Gm Opel Unit

BERLIN — General Motors Co.'s decision to scrap the sale of European subsidiary Opel raised new uncertainty Wednesday over the unit's future, astonishing politicians in Germany and Russia, and prompting workers to plan walkouts in protest.

The GM board's unexpected decision to call off the sale to auto parts maker Magna International Inc. and Russian lender Sberbank was a startling end to months of haggling in which Chancellor Angela Merkel and other German leaders had strongly backed the deal.

Now German workers worry GM will make even more cuts to return Opel to profit than Magna would have. Still, the decision won a cautious welcome from union officials in Britain and Poland, where workers had feared possible cutbacks in a Magna takeover.

John Smith, GM's chief negotiator for the sale of Opel, said in a conference call Wednesday that GM's plan was similar but not identical to that presented by Magna and Sberbank, which had called for the elimination of 10,500 European jobs or about 20 percent of the work force. Smith did not elaborate on possible job losses.

"We feel that ... once people have a chance to look at it closely, if they liked the Magna plan, they will also like" GM's plan, he said. "We're going to let the plan speak for itself."

"We'll very soon present to the European governments" the plan, Smith said. He added that GM hopes "to arrive by the first quarter at a restructuring plan with the governments and the unions."

GM's decision handed Merkel's new center-right coalition government an unwelcome test just a week after taking office. German officials swiftly demanded a restructuring plan from Detroit and vowed to recover by Nov. 30 a euro1.5 billion ($2.2 billion) bridge loan granted to keep Opel afloat as a buyer was sought.

"We will get the taxpayers' money back," new Economy Minister Rainer Bruederle told reporters. "Dealing with employees in this way eight weeks before Christmas is in no way acceptable," he added.

GM's Smith said the U.S. automaker would repay the loan "if we're requested to do so" by Germany.

"We've already begun to repay some of the bridge loan," Smith told reporters on the conference call. "All that is outstanding is roughly euro900 million."

Merkel, who was flying home from a speech to the U.S. Congress when GM announced its decision, made no public comment Wednesday, but officials made clear their annoyance.

Spokesman Ulrich Wilhelm criticized GM's "surprising 180-degree turn" and said Merkel may soon speak with President Barack Obama about the issue. GM is majority owned by the U.S. government, which said it wasn't involved in the decision to keep Opel.

On Wednesday, Merkel spoke with Opel's chief employee representative, Klaus Franz, who said it was "a black day for Opel."

There was a furious reaction from the governor of Germany's most populous state, North Rhine-Westphalia – which is home to Opel's Bochum plant and holds elections next May that will offer a crucial test for Merkel's new governing coalition.

"After many promises and months of negotiations ... GM has left workers out in the cold," said Juergen Ruettgers, a deputy leader of Merkel's party. "This attitude from General Motors shows the ugly face of turbo capitalism. It is completely unacceptable."

Russia, which had backed the Magna-Sberbank plan, also was caught by surprise.

"The decision by GM to turn down the deal was astonishing," state news agencies quoted Prime Minister Vladimir Putin's spokesman, Dmitry Peskov, as saying.

Germany had promised euro4.5 billion in further financing to support plans for Magna and Sberbank to take a 55 percent stake in Opel – a pledge that drew concerns from the European Union's competition commissioner.

With those plans off the table, Germany appeared unenthusiastic about pledging any new support – though it wasn't ruling it out.

"General Motors has the right to make an application, we have the duty to examine this application, and the outcome of this is open," Bruederle said.

GM, which said the European business environment and GM's health have both improved since the company put up Opel for sale, put the cost of restructuring at euro3 billion.

Unions and employees had offered cost-cutting concessions to ease a Magna deal, such as forgoing pay increases, that are now off the table. GM will face a new battle to secure concessions for its own plan – and raised the prospect of a bankruptcy if it is blocked.

"It is in the interest of the unions to negotiate a deal with GM," GM Europe spokeswoman Karin Kirchner said. Failure to restructure "would result in the operation becoming insolvent, an unnecessary and undesirable outcome for all involved."

However, German labor representatives were defiant.

"We won't help shape the way back to General Motors," Franz said. "Instead, we'll take up our classic function of defending the workers."

Franz said workers would start brief work stoppages Thursday. Rudi Kennes, another employee representative, said workers at the Antwerp plant in Belgium, whose future is uncertain, would walk off shifts on Friday and Sunday to warn GM against job cuts.

In Spain, Industry Minister Miguel Sebastian said Madrid would not make concessions to GM beyond a deal it had with Magna to accept 900 job cuts at Opel's Zaragoza plant.

"We are not willing to budge even an inch," he said.

The mood was different in Poland and Britain, where workers had feared pressure to save jobs in Germany would leave them bearing the brunt of cutbacks.

Magna had said it planned to cut about 10,500 of the 50,000 jobs at Opel and sister brand Vauxhall in Europe, with less than half the job cuts, or around 4,500, in Germany – home to around half the work force. It also said it would keep all four German plants open.

"The future is still uncertain, but our fear is smaller," said Miroslaw Rzezniczek, a Solidarity union official at the Gliwice plant in Poland. "Magna ... did not want to guarantee that our plant will not be closed."

Despite the lack of details, "I am pleased we will be dealing with GM because we know them and we understand their culture – and they know us," said John Featherstone, a Unite union official at Vauxhall's Ellesmere Port, England plant.

There was plenty of resignation, but little optimism, at the Ruesselsheim plant in Germany, where Adam Opel GmbH has its headquarters.

"They led us all around by our noses," worker Michael Kleinmann said. "They're not interested in the fate of individuals."

Co-worker Ali Yildiz said: "Now everything's possible again, just like a year ago."

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Associated Press writers Melissa Eddy and George Frey contributed to this report.

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On the Net:

http://www.opel.com

http://www.gm.com

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Filed by Ryan McCarthy  |