FRANKFURT -- General Motors' German unit Adam Opel edged out Swedish brand Saab and won a crucial contract to build the next generation of GM mid-sized cars in Europe, GM said Friday.
The fight to secure thousands of jobs in Europe's struggling auto sector had pitted the Opel plant in Ruesselsheim, Germany, against the Saab factory in Trollhattan, Sweden.
Both wanted to make the successors to the Opel Vectra and the Saab 9-3 models starting in 2008.
After months of review and amid pay concessions from workers at both plants, GM concluded that Opel could do the work for some $264 million less than Trollhattan over time, it said in a statement.
"Both plants presented compelling business cases but, in the end, the scale for this particular allocation tipped in favor of Ruesselsheim," GM Europe Chairman Fritz Henderson said.
The tug of war for work brutally exposed labor's weak position as carmakers demand cost savings at a time of slack demand and excess capacity that is exerting inexorable downward pressure on prices, squeezing manufacturers' margins.
The German and Swedish governments had lobbied hard to preserve jobs, offering infrastructure improvements or job training assistance to help tip the balance in their favor.
The news comes as a huge relief for Germany, where the auto industry accounts for nearly one in every seven jobs, and unemployment has hit its highest level since the 1930s.
At the end of the current round of GM Europe job cuts, about 17,000 employees will work at Ruesselsheim and 5,000 at Trollhattan.
GM is chopping as many as 12,000 jobs in Europe -- nearly a fifth of its work force -- to stem chronic losses in a region where it last made a profit in 1999.
"It was a difficult and tense phase. Now (Opel) can look forward to lead the company into a successful future," said Bernd Gottschalk, head of Germany's VDA car industry association. Swedes took the news as a blow.
"This is a dramatic day. This will affect the whole area and spread like ripples on the water to the smallest hot dog salesman," said Vincent Andersson, 60, a taxi driver in Trollhattan, who has lived there for 20 years.
"But the Germans are having a hard time too, and I guess in 20 years all industries will have moved to eastern Europe or China."
SAABS STAY SWEDISH
Saab will not walk away empty-handed, however. GM confirmed its commitment to the Saab brand and the Trollhattan plant.
"A major initiative is expected for the expansion of the Saab model lineup," it said, noting it would soon add to the core Saab 9-3 and 9-5 cars a premium "crossover" model that blends characteristics of cars and SUVs. It did not reveal where the crossover would be built.
In addition, GM will build a new mid-sized Cadillac called the BLS in Trollhattan next year.
"Furthermore, the company today committed to build selected Saab vehicles in Trollhattan through 2010," it said.
Boosting volume at Saab remains a key challenge for GM, which has said the current Saab models did not provide enough critical mass. Trollhattan made 128,646 units last year, around half the volume it needs to make a sustained profit.
But GM had ruled out closing Saab, one of GM's few global brands and an entry gate for buyers of premium cars.
Opel staff on Thursday clinched a wage deal with GM that labor leaders hoped would win it the prized mid-sized car deal over Saab, where labor costs have been around a quarter less.
Both Saab and Opel have posted years of losses. Opel said last week that 4,500 workers in Germany had taken voluntary severance packages, meeting its goal for cutting jobs this year and avoiding forced layoffs.
Another 1,500 jobs are slated to go in Bochum, Germany, by 2007. Some 3,500 Opel employees have taken early retirement.