International: Opel/Vauxhall reaches Europe-wide restructuring agreement

Opel/Vauxhall reached a framework agreement with its European Works Council in May 2010 to accompany a major Europe-wide restructuring programme, involving more than 8,000 job losses. The deal contains detailed investment and production commitments by the automotive multinational, along with substantial savings in labour costs.

Key points

GM retains Opel/Vauxhall

General Motors (GM), the US-based automotive multinational, faced with acute financial problems exacerbated by the worldwide economic recession, decided in 2009 to sell off its loss-making European operations, which produced vehicles mainly under the Opel, Vauxhall and Saab brands. Negotiations to sell these operations to Magna, a Canadian auto-parts multinational, and its partner, the Russian bank Sberbank, reached an advanced stage.

In November 2009, GM changed its plans, in the light of an improving business environment. It continued with its plans to dispose of Saab in Sweden (with a workforce of around 4,000) and, following uncertainty and fears of complete closure, sold the firm to Spyker Cars, a Dutch sports car manufacturer, in January 2010. However, GM decided to retain Opel and Vauxhall and to restructure their operations.

At the beginning of 2010, Opel/Vauxhall had approximately 48,000 employees. Of these, 24,300 (51%) worked in Germany, 6,900 (14%) in Spain, 4,700 (10%) in the UK, 3,400 (7%) in Poland, 2,600 (5%) in Belgium, 1,700 (4%) in Austria and 700 (1%) in Hungary, with the remainder in smaller operations elsewhere. It had four production plants in Germany (at Bochum, Eisenach, Kaiserslautern and Rüsselsheim), two in the UK (Ellesmere Port and Luton) and one each in Austria (Aspern), Belgium (Antwerp), Hungary (St Gotthard), Poland (Gliwice) and Spain (Zaragoza).

"Plan for the future"

On 9 February 2010, Opel/Vauxhall announced its restricting programme, in the form of a "plan for the future" aimed at placing the company "on the road to sustainable, long-term profitability".

As well as investments of €11 billion over five years (partly based on government loans and loan guarantees), the plan involved major restructuring to cut production capacity by 20%. It provided for 8,300 jobs to be cut across Europe, and for the Opel plant in Antwerp, Belgium to be closed. There would also be significant workforce reductions at production sites in Germany (3,260 jobs), Spain (900 jobs) and the UK (370 jobs), while 1,300 sales and administration jobs would be cut across Europe.

Nick Reilly, the Opel/Vauxhall chief executive, said: "We will build a European company that is profitable, self-sustainable and fit for the long term. This keeps a manufacturing base in Europe. It is good for Europe, good for our employees and good for our customers. We therefore trust that the plan will be supported by our employees." The company stated that "discussions with employee representatives about the overall plan continue both on European and national levels".

The reference to discussions at European level reflected the fact that GM Europe has a history of negotiating agreements with its European Works Council (EWC), known as the European Employee Forum (EEF). From 2000 onwards, management and the EEF signed a series of Europe-wide accords to accompany various restructuring exercises, providing guarantees on employment levels and conditions, or on the allocation of production to particular European plants. Such a negotiating role over substantive issues is very rare among EWCs.

On this occasion, the prospect of negotiating a European agreement to accompany the "plan for the future" seemed poor, because of the major job losses and production cuts involved, and their potential for causing divisions between workforces at plants in different countries. A particular stumbling block was the closure of the Antwerp site. The EEF has long been strongly opposed to any plant closures as part of restructuring, as has the European Metalworkers' Federation (EMF), which represents auto workers' trade unions throughout Opel/Vauxhall and has close links with the EEF.

Further, the EEF and EMF claimed that the Antwerp closure breached the terms of an agreement signed by management and the EEF in 2008. This "Delta framework agreement" provided guarantees on future production and employment at a number of European plants, including Antwerp.

It was particularly important for Opel/Vauxhall to reach consensus on the implementation of the job losses in the various countries, as some national governments had made the provision of the loans and loan guarantees required for the "plan for the future" dependent on such agreements.

National agreements

Negotiations over the implementation of the cost reductions and job losses proceeded at both national and European levels. Importantly, a deal was reached in April 2010 in Belgium on the fate of the Antwerp factory. This "social plan" involves an early retirement scheme for workers over the age of 50 and the offer of severance packages to other staff. It is expected that around half of the workforce will depart through these means by the end of June 2010. In the meantime, efforts are being made, led by the Flemish regional Government, to find an outside investor to take over the site and employ some or all of the remaining employees. If no investor is found by the end of September, the remaining workforce will receive the severance packages agreed in the social plan and the factory will close at the end of 2010.

Agreements were also reached in the other countries facing major workforce reductions. In Spain, a package of accords was signed to implement the 900 planned job losses at Zaragoza in a "socially responsible" way. They will mainly involve workers on fixed-term contracts and there will be a variety of re-employment opportunities for those who lose their jobs. The package also provides for moderate wage increases over a four-year period, as a contribution to Opel/Vauxhall's cost-reduction targets, and greater working time flexibility.

In the UK, an agreement was reached to freeze pay at Vauxhall plants at Ellesmere Port and Luton for two years, covering 2010 and 2011. Cost savings will also be made by changes to the company's occupational pensions scheme. The workforce reduction is being implemented mainly by means of voluntary redundancies at the Luton plant.

A cost-reduction agreement reached at Opel in Germany provides for a number of pay concessions by the workforce. Under the current sectoral collective agreement for the German metalworking industry, basic pay rates are frozen until March 2011, with employees instead receiving a one-off payment of €320 to cover the period from May 2010 until March 2011. At Opel, it has been agreed that this payment will not be made. Following the 11-month freeze, the metalworking agreement provides for pay rates to be increased by 2.7% from April 2011 to cover the period until March 2012. At Opel, this increase will be postponed until January 2012. Finally, holiday and Christmas bonuses will be halved in 2010 and 2011.

European agreement

On 19 May, Opel/Vauxhall management reached a draft Europe-wide framework agreement to accompany the "plan for the future". The accord provides detailed investment and production commitments for the various plants, including the development and introduction of new products (such as a new small car), with an exact timetable.

The four-year deal provides for labour cost savings of €265 million annually across Europe, including those already agreed, with €176.8 million of the total coming from Germany. The sums saved will be ring-fenced for expenditure on new products and managed by a trustee. If the company does not realise its planned new products, the savings will be returned to the employees.

The framework accord stresses that the employee contributions are just part of the overall "financing concept" of the plan. The other elements are funding from GM and the loans for which the company has requested government guarantees. The implementation of cost-reduction initiatives measures will be distributed across all European locations as fairly as possible, the agreement states.

Once the current round of restructuring and job losses is completed, there will be no compulsory redundancies during the term of the agreement (that is, before the end of 2014).

It has been agreed that Adam Opel, the German-registered company that controls Opel/Vauxhall, will change its legal form from a limited-liability company (GmbH) to a joint-stock company (AG). Under [Article:90905#7.12 "German company co-determination law"], this means that the supervisory board, on which employee representatives sit, will have enhanced powers, for example over product and investment decisions.

The principles of the framework agreement will be implemented through local agreements at the individual sites. These will include details of a new employee profit-sharing scheme and provisions on flexible shift patterns.

Support for the deal

Nick Reilly stated that the "European framework contract and the specific agreements in each country, including Germany, are important steps along the way to a new and successful company".

Reilly added: "The negotiations were not easy. The company was damaged by the global crisis and has to restructure to recognise a lower industry. On the other hand, we need to keep innovating in new technologies and products to maintain Opel/Vauxhall as a leading European automotive company that can compete worldwide. I totally respect the unions' important partnership in the company going forward and am grateful for the employees' willingness to contribute to the cause. They will be rewarded by ongoing employment and the chance to share in the economic revival of the company. In the end, everyone involved had the best interests of the company in mind. Now we have a common base for profitable growth."

The EEF's chair, Klaus Franz commented: "By virtue of their agreement, employees demonstrated that they are ready and willing to contribute to the company's future when they are offered security and long-term prospects in return. That way, the prerequisites for government guarantees are fulfilled as well. The cost reductions we agreed to are offset by management's commitments and the collateral the company has put up. In return, we will see fresh investments, new innovative products, better job security, co-determination and a change in the company's legal form. That way, Opel and its employees have promising prospects for the future."

Franz also claimed that the framework agreement is binding on the parties, and that management will not be able to pull out of its commitments if the German Government does not provide requested loan guarantees of over €1 billion (no decision has yet been taken on the request, which has met with a generally unenthusiastic response from the Government).

The draft European framework agreement had to be ratified by unions and employee representatives in the individual countries and plants. By the end of May, this had occurred in all cases apart from the Bochum site in Germany, and the EEF expected approval from Bochum in the near future.

This article was written by Mark Carley, European editor.

European employment policy, practice and law, June 2010