PSA's conflict over Opel factory is 'short-term' pain, Tavares says

Tavares: "It's important that ... Opel will be managed by their management."

PARIS -- Contentious talks between PSA Group and the German union IG Metall over the future of Opel's factory at Eisenach are a necessary short-term pain, CEO Carlos Tavares told PSA shareholders.

Speaking at the French automaker's annual meeting, Tavares said the negotiations will "make a bit of noise" in the coming weeks. "Don't be surprised. It's what has to be done to put this company back on track," he said.

PSA, which acquired Opel and Vauxhall from General Motors last year, is starting to put a recovery plan in place for the two brands, which have lost an average of nearly $1 billion a year for the past decade. Tavares has said that some Opel plants are half as efficient as the best-performing PSA factories.

In recent months, workers at Opel factories in Austria, Hungary, Poland and Spain have signed new accords with PSA. Earlier this month, PSA agreed to invest in new capacity at the Vauxhall van plant in Luton, England. It also negotiated buyouts for some German employees.

The plant at Eisenach, which produces the Opel Adam and Corsa, has been a holdout. The powerful IG Metall union has refused to forgo a 4.3 percent pay raise in return for future production guarantees for a new SUV model, saying that not enough of the factory’s 1,800 workers would be protected.

The stalemate at Eisenach has already drawn concern from unions in the UK and France, who have urged German employees to make the same concessions they have. The German government has stepped in to say it expects PSA to honor commitments it made when it announced the agreement to buy Opel.

Addressing shareholders in PSA’s new headquarters outside Paris, Tavares said he was particularly proud of PSA’s unions “who are able to look toward the future. They are capable of making sometimes short-term unpopular decisions so as to guarantee the long-term durability of the company.”

"It's important that we do what is necessary to put management back at the center of the system so that Opel will be managed by their management,” he said.

At the meeting, shareholders approved a 1 million euro bonus for Tavares for his efforts in turning around Opel, bringing his total 2017 compensation to 6.7 million euros. CFO Jean-Baptiste de Chatillon will receive a bonus of 500,000 euros, for a total compensation of 2.8 million euros.

Opel lost 179 million euros in the last five months of 2017, following the closing of the deal on July 31. PSA has vowed to bring to company to profitability by 2020, and says efficiency measures already put in place have led to a 17 percent reduction in fixed costs, including 30 percent less in travel costs and 39 percent in IT operating expenses.

Development costs for the new Opel Corsa, due in 2019, have been halved compared to previous targets, PSA said. The model was to have been a joint effort between PSA and General Motors under an agreement signed in 2012, but PSA changed the timetable to bring development in-house.