German government must help in Opel dispute, Merkel says

Opel wants to build only an SUV in Eisenach, rather than two models, Spiegel reported.

Photo credit: Bloomberg

BERLIN-- German Chancellor Angela Merkel said she expected PSA Group to stick to the commitments it made during its takeover of Opel last year and that her German government felt it had to help.

The future of Opel's Eisenach factory in Germany hung in the balance on Monday after shop stewards rejected wage concessions demanded by PSA in exchange for a commitment to invest in a production line for a new model there.

"The German government, along with the regional government here, feels obliged to do its bit to help," Merkel said on Wednesday. "These discussions are ongoing but I can't say anything about the results yet."

PSA said in February 2017, before buying the European arm of General Motors, that it would uphold job guarantees at Opel and Britain's Vauxhall, offering reassurance to both Merkel and unions at the German automaker.

Analysts said at the time it would be tough to keep that promise and, with Opel still losing money, management had pressed union leaders to forgo a 4.3 percent pay rise this month to create enough leeway for further investments in Germany.

Spiegel magazine, citing sources at labor union IG Metall, reported that Opel would cut the workforce at the Eisenach assembly plant to 1,000 from 1,800 if existing production plans were implemented.

The magazine reported that Opel management now wanted only to produce a SUV in Eisenach, rather than two models, and that it planned to work only two shifts instead of three previously. Opel builds the Adam minicar and Corsa subcompact in Eisenach, according to Automotive News Europe's Guide to European Assembly Plants. Corsa production is due to move to Zaragoza, Spain, next year and be replaced at Eisenach by the successor to the Mokka SUV.

Responding, Opel said it didn't comment on speculation, but added: "Improving the competitiveness of the Eisenach works is currently a matter under discussion with our social partners, and is a precondition for sustained investment."