GM Europe is reaching a compromise over cost cuts

Ruesselsheim, Germany. After weeks of discussions over GM Europe's cost-cutting package, a partial solution that's acceptable to all parties seems to be near.

In October GM said it planned to eliminate up to 12,000 jobs in Europe -- including 10,000 at Adam Opel in Germany -- to save half a billion euros by 2006.

It appears likely that around 7,500 staff in Germany will be moved to newly-created companies where they will be retrained for two years and will receive 95 percent of their wages.

A small number of employees at Opel's Bochum and Ruesselsheim plants will receive severance pay or be sent into early retirement.

GM Europe would be prepared in principle to guarantee that German production sites will stay open until 2010.

"There is a realistic chance that we can avoid shutting down plants," says GM Europe boss Fritz Henderson.

However, Opel's works council first will need to make some wage concessions.

Wages at Opel are about 15 percent above the German metal industry's negotiated level. If trade unions agree on wage concessions, Opel would stand a good chance of selling off subdivisions such as its logistics operations in Bochum, Germany, (Caterpillar is interested) or its Kaiserslautern, Germany, components plant. This part of "securing Opel's future" will be negotiated in spring, in connection with the awarding of contracts for the next-generation Opel Vectra and the Saab 9-3.

In the meantime, GM is preparing a new organizational structure for its European business.

Product engineering and design, production and sales will be controlled centrally. Adam Opel AG would be transformed into a limited liability company by 2005 for both operational and legal reasons.

GM Europe hopes that this will result in savings of 300-500 million euros in 2006. The board of directors would be reduced and would be turned into a management board. Workers' representatives will keep their co-determination rights.

Opel CEO Hans Demant would become responsible for all of the GM brands' product development in Europe as part of the new structure.

GME will also end its OnStar telematics service in Germany.

The service will be shut down in Europe on Dec. 31, saving "several millions," say company sources.

The unit's 15 employees will be moved to other areas. The German ADAC motoring organization will take over SOS functions offered by OnStar.

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