Done Deal

The German government gave approval for Magna and Sberbank to take a majority stake in Opel. They will own 55%, the union 10%, and GM will retain 35%. Apparently, some of Magna’s customers aren’t too happy about this turn of events. Magna now competes with VW, BMW, Ford, and Toyota as well as supplying them with parts. VW already said they might pull their business if Magna bought Opel. This should be fun to watch.

Or not. GM announced today that they will continue to own and operate their European marques. This will also be fun to watch, though in a much shorter time frame. GM also announced around 10,000 impending layoffs at their European operations and the unions announced strikes as early as Wednesday (next week, I presume).

Yes, it will be very painful. Germans are not used to layoffs, and the inherent over-capacity of Opel and others demands cuts be made. German Chancellor Merkel’s political reputation is on the line, since Magna promised far fewer layoffs in Germany than GM will to make.

“…since Magna promised far fewer layoffs in Germany than GM will to make.”

How reasonable are those promises? Bidniss is bidniss, as our ex-president is reputed to have said. Not your ex-pres, of course, Docnick. Unfortunately for Chancellor Merkel, she does not call the shots for GM.

I don’t know specifically what the laws are in Germany, but I believe in Europe in general, countries have laws that penalize companies for laying off workers in large numbers. This forces them to spend more time planning before they expand. Where I work, they have figured out that it is so expensive to lay off workers, it makes more sense to not fill positions that are vacated than it does to lay people off. “Bidniss” may be “bidniss,” but we Americans enable the economic bubbles when we allow companies to lay off thousands of workers at a time on a whim. It enables them to make bad decisions, and reverse them at the drop of a hat. The American worker deserves to be treated with more dignity than the average asset or commodity.

I will depart my soap box now and get to my point. Magna probably doesn’t have a bloated workforce in the first place. When then promise not to lay off workers, it isn’t the hollow promise you might expect from an American company.

Yesterday I read that GM has changed its mind and decided to keep Opel.

“…to lay off thousands of workers at a time on a whim.”

I can’t imagine that any company would lay off workers on a whim. The business is there or it isn’t. US firms do furlough employees more frequently than European firms do, but USA businesses also are better money making machines that European ones are, too. And European firms in the US lay don’t treat employees any differently than US companies do.

“Magna probably doesn’t have a bloated workforce in the first place. When then promise not to lay off workers, it isn’t the hollow promise you might expect from an American company.”

While Magna may not have a bloated work force (I don’t know), they still have to work with the same problems that anyone would in operating Opel. If the cars aren’t selling, jobs have to go away until production needs to be increased.

I suppose you were referring to the Detroit 3 when you mentioned bloated workforces. You are aware that the UAW is the main reason that the workforce is bloated, aren’t’ you?

Magna has a number of operations in Europe, mostly making parts and custom assembling cars for Chrysler, BMW and others. They may have envisaged transferring some Opel employees to their other plants. But I agree that with the excess car capacity in Europe, and Opel having 10,000 redundant employees, something has to give.

The British workers are cheering GM keeping Opel and Vauxhall, since there will be fewer layoufs in Britain than Magna would have had.

I pulled up an old post from when GM first announced their intent to sell their European operations instead of writing a new post. My response to my original message was because I saw the same new info as you.

One interesting solution re: “reduction in force” is what my old Labor Relations Prof told me happens in Japan: they pass the excess workers down the supply chain.

For example, suppose Honda has more workers of a given craft than they can use. They might call up their tire supplier (Yokohama?) and see if they would allow Honda to give them workers “on loan.” Then, when business picks back up, the loaned workers are recalled.

If the supplier doesn’t need help, why would they accept the workers? It seems to me that if new car production is down, the need for tires, for instance, is lower and the tire manufacturer would not need any help around the factory. I suppose there might be instances where this could work, but I can’t think of any. And what would they do? The Honda workers would not be trained to work at Yokohama Tire.

jtsanders, businesses have to react to changes in the level of business, but different companies react at different speeds. Here in the US, companies can hire and lay off workers at their discretion, so forecasting and planning aren’t as stressed. Over in Europe, the government penalizes companies for laying off a lot of workers at a time, so those companies are forced to do a better job or forecasting and planning. They can’t get away with the same style of management in both places. Therefore, you don’t typically see a European company lay off workers thousands at a time like you do here in the US. In the US, you don’t have to plan and forecast as well, and that lack of planning happens at the expense of the average worker.

Latest update: the GM workers in Germany are on strike. They don’t like the deal. If Opel goes under, they will still be on strike, but the German government will bail out the workers.

We actually have some contractors around here that will do that,I think its a very nice gesture-Kevin

“…the GM workers in Germany are on strike”

They said they’d do it, and remained true to their word. I’m not sure how it helps them, though. What will they gain by putting Opel out of business? Is the German government going to take it over and try to sell it? What a great deal for Magna and Sberbank if they decide to buy it from Germany. I’m sure thay can get it for a lot less than the original GM deal. Considering the vertical integration afforded by that deal, Magna could use the displaced Opel workers at their parts plants. But then again, demand for auto parts is quite low just now, and very few, if any, would be needed. I guess they’ll just have to collect their unemployment checks and go skiing. Or maybe river skating.