GM Guarantees German Jobs in Exchange for Pay Freeze

General Motors Co. (GM) agreed to guarantee the jobs of more than 20,000 German workers in exchange for a wage freeze as the unprofitable Opel brand works to reduce spending.

German pay increases, put on hold in November as part of the negotiation process, will be postponed through 2015, the Ruesselsheim-based unit said in a statement today. GM will refrain from forced firings through 2016 as part of the deal.

GM also agreed to keep part of its facility in Bochum, Germany, as a components and logistics center after auto production stops four years from now, backtracking from a threat to close the plant at the end of next year. The decision will secure about 1,200 of the location’s more than 3,000 jobs.

GM Europe, which includes Opel and Luton, England-based Vauxhall, has lost $18 billion since 1999, including a $1.8 billion deficit last year. GM reiterated targets on Feb. 14 for the division to improve earnings this year, helped by new models such as the Mokka and Adam, and to break even by 2015.

“It’s a first step in the right direction but Opel needs much more restructuring,” said Florent Couvreur, an analyst at CM-CIC Securities in Paris. “Akerson said Opel would become profitable by mid decade. They’re far from it.”

GM shares dropped as much as 51 cents, or 1.9 percent, to $26.89 and were down 1 percent as of 11:31 a.m. in New York trading. The stock has declined 5.9 percent this year, valuing the American company at $37.1 billion.

German Production

GM employs 40,000 people in Europe, including 22,000 in Germany. Stephen Girsky, head of Opel’s supervisory board and acting head of GM Europe, threatened in January to close the Bochum assembly plant by the beginning of 2015 with a deal to reduce costs as Europe’s car market sinks for a sixth year.

Opel’s main factory in Ruesselsheim will be the exclusive location for building the Insignia and a second model will be added at the plant, the automaker said today. The Eisenach factory will build the Corsa and Adam small cars.

Gearbox assembly in Bochum will be scaled back to two shifts instead of three, with 700 positions being cut in the move, Opel said. The automaker had previously planned to cease gearbox production entirely in the city at the end of 2013.

“General Motors fully supports Opel and is securing the necessary financing for the coming years, until we can once again return to profitability,” Girsky said in the statement.

Deliveries Plunge

The executive pressed for a labor agreement this month before former Volkswagen AG (VOW) manager Karl-Thomas Neumann takes over as Opel chief in March to lead the turnaround. Girsky, who is GM’s vice chairman, will also hand over his role at the Detroit-based carmaker’s European business to Neumann.

European deliveries by Opel and Vauxhall plunged 16 percent last year to 834,790 vehicles, almost double the 7.8 percent industrywide contraction. The brands have a target of keeping their European market share stable this year after a drop to 6.7 percent in 2012 from 7.3 percent in 2011.

GM’s efforts to return to profitability in Europe include a vehicle-development and parts-procurement alliance agreed to last year with Paris-based PSA Peugeot Citroen (UG), Europe’s second- biggest carmaker. Projects will include sharing the underpinnings of three compact and small-car lines.

Opel plans to roll out 23 new products from 2012 to 2016, including the South Korea-built Mokka compact sport-utility vehicle, the Adam and the Cascada convertible coming to showrooms in April. The brand aims to increase its deliveries outside Europe as part of the turnaround plan.

“We still have to settle the details and cast the deal as a labor contract and collective-bargaining agreement but this is fundamentally speaking the breakthough,” Wolfgang Schaefer- Klug, head of the Opel works council, said in today’s statement.

To contact the reporters on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net; Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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