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GM seen step away from giving up on Opel for good

GM seen step away from giving up on Opel for good

Just hours after General Motors abruptly fired Karl-Friedrich Stracke as chief executive of Opel last week, industry observers were already beginning to ask whether it was time to start writing the troubled European unit's epitaph. By Christiaan Hetzner.

Since GM emerged from bankruptcy three years ago, Opel has racked up $3.5 billion in underlying l osses thanks to an ever shrinking European car market, a bloated fixed cost base and an image that GM has helped bring low.

In the past four weeks, however, management and labour had made promising signs of progress, approving a mid-term business plan and agreeing to end production at a German factory in 2017 as the basis for restructuring negotiations. Morgan Stanley analysts even began shifting their attention from GM’s Opel problems to those of Ford in Europe.

All for nothing as everything appears to be up in the air again, including killing off the brand, even if company sources argue one person’s departure changes little. GM and Opel have not commented publicly on the reasons for Stracke’s removal, other than to say he would “take on special assignments” at GM.

One industry observer believed GM CEO Dan Akerson was following the advice of ex-GE boss and management guru Jack Welch, who once said that if a company didn’t measure up, the only options were to “fix it, sell it, or close it”.

“This will be the last such attempt under Akerson and since GM couldn’t sell Opel last time, they will just wind it down if they can’t fix it,” said Ferdinand Dudenhoeffer, a professor at the Centre Automotive Research (CAR) in Duisburg, Germany.

Armin Schild, a regional boss of the IG Metall union, which negotiates on behalf of Opel’s blue-collar workers, and one of Opel’s own supervisory board members, has already warned that far more is at stake in upcoming negotiations than simply swapping job guarantees for wage concessions.

NO AGREEMENT

If talks fail, “the overarching message then is there is no agreement with IG Metall and that is possibly the beginning of the end of the company,” Schild told reporters late in June.

While Stracke’s sacking may please investors on Wall Street demanding quick results, observers in Germany have criticised the timing as myopic and characteristic of GM executives who lack commitment and strategic vision.

“Opel’s problems won’t be solved by managing it on the basis of quarterly results. Either the owner adopts a long term strategy and sticks to that plan or it looks pretty damn bleak for the brand in the future,” said Andreas Halin, Managing Partner of GlobalMind Executive Search Consultants in F rankfurt and an expert on corporate management.

GM has a history of abrupt u-turns that have damaged its credibility. In September 2009, GM’s board agreed to hand control of Opel over to a consortium led by automotive parts maker Magna in a deal brokered by Chancellor Angela Merkel, only to change its mind weeks later.

Then GM spent months pressing for financial aid from four German states where its manufacturing plants are located before withdrawing the application.

And now GM Vice Chairman and Opel supervisory board chief Stephen Girsky has removed Stracke less than a month after the business plan was approved and a key logistics deal was struck with France’s Peugeot.

“The worst is that GM frequently changes course. Until yesterday the strategy was to guarantee jobs through 2016, today it is making cuts and closing plants as quickly as possible,” Dudenhoeffer said.

“Why else did they get rid of Stracke? GM was not satisfied with the business plan and the second quarter results were blood red, so Girsky shot from the hip to save his own skin.”

Ahead of tense restructuring negotiations that could last through October, IG Metall’s Schild put on a brave face in public, calling the move on Friday “a chance that GM and Opel must use to secure the future.”

Sources at the company say nothing has changed apart from Stracke’s departure, but no reassurances were offered in the statement on Thursday that Girsky would honour past agreements and officials were slow to confirm he would.

A spokesman for Opel said on Saturday that neither the business plan nor the goal of reaching an agreement with unions before November over wage concessions in Germany were at risk: “Both plans were not the sole accomplishments of one person and thus not dependent on that individual, but rather the result of the commitment of the entire management board as a whole.”

DROWNING

While IG Metall said it welcomed the decision to install Girsky as interim CEO, given his pull in the Detroit headquarters, one person close to the talks admitted “we have no certainty” whether GM might take a far harder position going into the forthcoming negotiations.

The choices for Opel are now only becoming less and less appealing as GM compounds the problems of a slumping European car market and overcapacity with a leadership debate.

Wolfgang Meinig, head of the FAW automotive research department at the University of Bamberg, says radical cuts are needed now more than ever to nurse the company back to health.

“The most senseless thing a loss-making company can do is maintain existing overcapacity and guarantee jobs under pressure from unions and politicians – it’s deadly, like a millstone around the neck of someone drowning. There is only one way to guarantee jobs and that’s by earning a profit,” he said.

Experts wonder whether Opel can survive such strong medicine after all the upheaval and strategic zig-zags, or whether the damage done to consumer confidence in the brand is irreversible.

“After all the wrong decisions taken, I really am concerned whether it will still be around in 10 years time,” Meinig said.

GlobalMind’s Halin said that as well as turning customers away through its heavy handed dealings with Opel, GM’s inability to stick with one plan would very likely harm staff morale.

“A manager has to be able to motivate one’s team, to credibly instil a spirit of optimism. But when one starts to wonder if anything that top executives say only has a half life of 24 hours, then a manager won’t be able to perform their job with the necessary conviction,” he said.

“As a headhunter I know that the other German manufacturers are wringing their hands looking for qualified workers. I am sure Opel employees would be open to being poached by a competitor and if I worked at Opel – whether I was a manager, engineer or assembly line worker – I would immediately send my application to Volkswagen or BMW,” Halin said. DM

Photo: A model poses next to an Opel Mokka car during the German premier at the AMI Auto Show in Leipzig June 1, 2012. The show opens to the public on June 2. REUTERS/Fabrizio Bensch

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