GM British Workers Jeopardized as Germans Bankroll Opel Rescue

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June 5 (Bloomberg) -- General Motors Corp. sold more cars in Britain than anywhere else in Europe last year. That may not be enough to save Paul Geary and 5,500 U.K. workers like him.

It was Germany, and not Britain, that agreed to rescue GM’s European Opel unit with bridge loans last week to ease a sale to Magna International Inc. Prime Minister Gordon Brown hasn’t committed money to a bailout, raising concern U.K. employees will be cut after the deal as more Germans are spared.

“The Germans came with cash in hand,” said Geary, 43, an assembly-line worker for 20 years at GM’s van factory in Luton, north of London. “This government hasn’t shown any commitment to manufacturing.”

Opel sold almost 350,000 vehicles in the U.K. last year under the Vauxhall brand, the No. 2 seller in the market behind Ford Motor Co. Magna, Canada’s largest auto-parts maker, plans to fire as many as 11,100 workers and pledged to retain all four production sites in Germany after Chancellor Angela Merkel agreed to provide 1.5 billion euros ($2.1 billion) in loans.

While Vauxhall has 14 percent market share in its home country, Opel captured just 8 percent of the German market in 2008, trailing Volkswagen AG, Daimler AG’s Mercedes-Benz and Bayerische Motoren Werke AG.

GM bought Vauxhall in 1925, four years before the U.S. company acquired Opel, based in Ruesselsheim, near Frankfurt. The British business built its first car in the Vauxhall district of London in 1903 before moving to Luton in 1905, according to its Web site. During World War II the factory made Churchill tanks, while Opel was manufacturing “Blitz” trucks used in the invasion of Poland.

Cavalier, Viva

From the 1970s, most Vauxhall models were based on ones from Opel, with the rebadged Chevette and Cavalier helping the company to narrow the sales gap with Ford and British Leyland. The Viva sedan was the brand’s last home-grown design in 1979.

When asked about the future of Luton, which employs 3,000 people, Magna Co-Chief Executive Officer Siegfried Wolf said this week: “At end of the day, companies have to be profitable. Companies that are not profitable are not good for society.”

Aurora, Ontario-based Magna will cut no more than 2,600 German jobs, Wolf said. The future of car factories at Bochum, Eisenach and Ruesselsheim, and an engine facility in Kaiserslautern, is “not in question,” he said.

If cuts were made in proportion to the number of Opel workers located in Germany -- about half the 50,000 total -- the country’s share of the planned firings would be more than 5,000.

Peter Schmidt, an analyst at Automotive Industry Data in Leamington Spa, England, said he’d be “seriously concerned” if he worked at Vauxhall.

‘Payback Time’

“He who pays the piper calls the tune,” he said. “It’s payback time and payback is keeping as many jobs as you can.”

Brown has resisted specifying what funding he would be prepared to contribute to save Vauxhall, and Business Secretary Peter Mandelson said May 28 that employees should prepare for some job cuts.

“All I hear is that Mandelson is trying his best,” said Bob Hills, a Luton production-line worker for eight years. “I’d like to see something material come up. Those that have put up the most money are going to get the biggest say.”

The Department for Business, Enterprise & Regulatory Reform said in an e-mail to Bloomberg that securing Vauxhall’s future is a prime concern for the government.

“Ministers have obtained commitments to Vauxhall production continuing in the U.K. from GM and Magna,” BERR said. “We are continuing discussions with all parties to pin down specific plans and specific implications for jobs.”

Easy Target

As Vauxhall’s headquarters, Luton may be an easy target for cuts, with 1,800 jobs in administration. The nearby van plant employs 1,200 and makes the Vivaro for Vauxhall and Opel, the Traffic for Renault SA and the Primastar for Nissan Motor Co.

Production in Luton reached 87,000 units last year and commercial-vehicle demand has tumbled in the recession, with U.K. sales down 46 percent in the first four months compared with a 29 percent drop for cars, according to the Society of Motor Manufacturers & Traders. Rival van maker LDV Group Ltd., based in Birmingham, applied for protection from creditors this week after a rescue by Malaysia’s Weststar Group fell through.

The Luton plant’s focus on vans might make it more vulnerable to closure, said Geary, the assembly worker. The government has been more concerned with saving banks and dealing with a row over political expenses paid to lawmakers, he said.

“Mandelson hasn’t visited here,” he said outside the factory gates after finishing a shift. “The last thing Luton needs is for GM to close down.”

Hard Times

Joe Manzullo, a panel beater at Vauxhall in the 1970s and ‘80s and now owner of The Sicilian café, which draws most of its customers from the plant, reckons sacked workers will find it tougher to find jobs in the recession than in 2002, when GM stopped making cars in Luton and fired 1,900 people.

“Times now are hard,” said Manzullo, 61. “Back then after finishing, they walked into other jobs.”

Magna’s Wolf didn’t comment on the future of Vauxhall’s main production site at Ellesmere Port, close to Liverpool in northwest England, which employs 2,500 people and builds the Astra compact car. The model is Opel’s top seller, ranking fourth in Europe last year. In Britain it’s outsold by the company’s smaller Corsa, built in Germany and Spain.

Magna, which is taking a 20 percent stake in Opel, and its Russian backer OAO Sberbank, which will own 35 percent, must judge whether scrapping the Vauxhall brand and consolidating production with Opel would damage U.K. sales.

U.K. Brand

In Vauxhall’s favor is the perception among many car buyers that it is a U.K. brand, so much so that the BBC’s Top Gear, the country’s most-watched motoring show, states in a Web-based guide that the company is “actually American.”

About 20 percent of Vauxhall customers always buy that brand, according to GM.

“We’re very much aware that familiarity with the brand is very important,” said Craig Cheetham, a Luton-based spokesman. “Imagine the cost of changing all that.”

Still, Nissan, the biggest carmaker in the U.K. through its plant in Sunderland, England, says its credentials as a “British” company employing 3,800 people haven’t done much to support sales, with many people in northeast England unaware that the company even has a plant in the region.

“With what’s happening now in the economy it’s an asset we’re trying to promote,” said Gabi Whitfield, a U.K.-based spokeswoman for the Japanese company. “But generally people don’t care. It’s about price.”

Flanders Loan

Klaus Franz, head of the GM Europe works council, said in a June 3 statement that Luton is threatened, together with Bochum, which makes the Astra and the Zafira people mover, and Antwerp, Belgium, another Astra site. After Germany, with 25,000 employees, Spain is the most reliant on Opel jobs, with 7,000, followed by the U.K. and then Poland.

While Belgium isn’t a major market for GM, the state of the Flanders region offered 300 million euros in loan guarantees and proposed buying the site for 200 million euros and leasing it back to the company. Flanders will discuss the plant’s future plant with Magna in the coming days or weeks, said Luc De Seranno, a spokesman for regional leader Kris Peeters.

In Spain, the government will fight “tooth and nail” to defend the Opel factory in Zaragoza, Industry Minister Miguel Sebastian said June 2, according to newswire Efe. The plant employs more than 5,000 manufacturing workers and produced 423,000 autos last year. That’s just 50,000 vehicles below Opel’s total output in Germany.

While Opel’s Spanish production outstrips sales there four- to-one, Zaragoza’s focus on making Corsas for export means production cuts have been minimized as scrapping incentives across Europe spur demand for smaller cars. The plant opened in 1982, making it one of Opel’s newest.