Opel unions' failed German gambit plays into GM's hands

Opel workers in Bochum, Germany, appear to have lost a high-stakes gamble to save their factory after an attempt to put pressure on employer General Motors (GM) backfired as it opted to close the plant ahead of schedule.

Though the U.S. carmaker's decision will result in higher short-term restructuring costs, it is likely to benefit in the longer term from an earlier reduction in capacity in a European market that last year recorded its lowest sales for 17 years.

Unless the protracted slump eases, it threatens to overwhelm the European turnaround strategy not only of GM, but also manufacturers including PSA Peugeot Citroen and Ford .

GM is frantically trying to fix its problems in Europe, where losses last year more than doubled to $1.8 billion, marking the 13th straight year of red ink in Opel's home market, as too many workers produced too few cars.

Opel unions and GM had agreed to let German factory workers vote on a restructuring plan for Opel's domestic operations, a compromise deal that would have allowed Bochum to continue making cars until the end of 2016 - two years later than GM originally intended.

MAJORITY VOTE

Egged on by their local labor leader, Rainer Einenkel, three quarters of the plant's workforce voted on Thursday against ending production at the end of 2016.

Within the hour Opel said all concessions were off the table, scheduled no further talks and returned to its original plan to halt assembly of transmissions this year and cease car production at the end of 2014.

"Einenkel told the workforce that they would have a stronger bargaining position if they reject the deal ... He did everything possible to ensure they would vote against it," a source at the company said.

"I wonder what workers will do when they realize they put all their trust in Einenkel, only to see him gamble and lose."

One Opel labor leader said that GM's move should not be interpreted as an empty threat.

"This was no hot-headed spontaneous reaction," the union member said. "Rather, it reveals management was well prepared for the eventuality and moved ahead with their (previously) announced alternative.

Another labor source close to the talks said that management would not even have to worry about a wildcat strike in Bochum like the one in 2004, since all production is stopping until April 3 because of weak demand in Europe.

"Who would even notice if there was a strike?" he said.

ANTWERP BETRAYAL

An analyst with Edward Jones said that closing Bochum two years earlier is the right move for GM.

"Investors as a whole will be glad to see some of that capacity coming out a bit earlier," analyst Christian Mays said. "That's something we need to see in this market to get the market right-sized."

Speaking to Reuters, Einenkel defended his workforce's repudiation of the deal, arguing that GM could not be trusted while specifics remained unclear.

"GM has often broken its word in the past - just look at the example of Antwerp," he said.

Instead of allocating the small Mokka SUV to its Belgian factory as initially agreed, GM used an opening clause in the contract to shift production to South Korea and close Antwerp in 2010.

Einenkel said he was betting that GM would not close a plant in the middle of a model's life cycle, forcing it to invest in new tooling to build the Zafira Tourer MPV in another factory only two years before its production runs out.

"The Zafira model cycle runs until 2016, maybe a few days more. You don't just cease building a car until the successor model is launched - you'll lose all your buyers," he said.

Wolfgang Meinig, of the FAW automotive think-tank at the University of Bamberg, criticized Einenkel's move, since it plunged Opel back into the media spotlight and ended a period of relative quiet since the deal was thrashed out.

"It can't continue like this. Unions must finally put a stop to the endlessly damaging headlines they manufacture for Opel," Meinig said.

(Additional reporting by Jan Schwartz in Hamburg and Ben Klayman in New York; Editing by David Goodman)