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y Associated Press posted December 9, 2004 BERLIN -- General Motors Corp. offered German workers generous buyouts Thursday to pave the way for up to 12,000 job cuts in Europe, where the world's largest automaker is struggling to end years of losses amid fierce competition and weak demand.
The agreement, which will see as many as 10,000 jobs slashed at the Adam Opel AG unit in Germany, followed weeks of talks with employee representatives after GM Europe said in October it needed to cut jobs to turn around its Opel, Vauxhall and Saab brands.
GM said 15 percent of management jobs in Europe will be eliminated as part of the program, which aims to produce cost savings of 500 million euros ($665 million) a year.
The company refused to say how much the job-cutting agreement would cost. In Germany, it pledged to avoid forced layoffs and encouraged workers to leave voluntarily by offering them buyouts and help with retraining and job placement.
Andreas Bremer of Germany's Institute for Auto Market Research said he doubts the incentives alone will let Opel reach the savings it wants. "Layoffs will probably be inevitable, and on a massive scale," he told Deutsche Welle television.
Opel, which also plans to shift employees into part-time work, outsource operations and offer early retirement deals, said a worker with 30 years on the job could expect severance pay of 200,000 euros ($267,000).
Full retirement benefits and a year of retraining for those who leave are also part of the deal, which is "unprecedented in German industry," said Klaus Franz, the chief worker representative at Opel. "Both sides expect this offer to be attractive for many employees," he said.
Vauxhall and Saab gave no details of how planned job cuts in Britain and Sweden would be implemented. Thursday's deal foresees the loss of some 2,000 jobs in total at plants in Ellesmere Port, England; Trollhaettan, Sweden; Antwerp, Belgium; and Zaragoza, Spain.
Opel, which concedes that its previous managers let quality problems get out of hand in the late 1990s, has won praise for a sharply improved model line over recent years. It launched a restructuring program in 2001.
But GM says weak consumer demand and increased competition from Japanese and other carmakers mean it must act now to reduce costs at Opel, Saab and Vauxhall.
"Facing the realities of the market is absolutely imperative," GM Europe president Carl-Peter Forster said. "Over the past three years, we worked very hard to find other solutions. Contrary to all forecasts, however, the market has not improved."
GM's struggles of late have not been limited to Europe, and neither has its cost-cutting. The company last month said it will close an aging factory in Baltimore next year and idle another plant in Linden, N.J. Those moves will affect about 2,000 workers.
GM's overall business has been hampered by slumping sales and declining market share in the United States, its largest market. Rising pension and health-care costs also have been a drag on profits.
GM said last week its U.S. sales fell 13 percent in November and its U.S. market share sank to one of its lowest points on record at 24.8 percent. Trying to stage an end-of-the-year rally, the company on Friday begins a new national sales promotion in which it will offer bonus cash on top of current incentives that could push overall rebates to $5,000 or $6,000 on some models.
GM's global automotive operations lost $130 million in the third quarter, and the company in October lowered its 2004 earnings guidance to between $6 and $6.50 a share from its midyear guidance of $7 a share.
In afternoon trading on the New York Stock Exchange, GM shares fell 4 cents to $38.22. In the past year the stock has traded as high as $55.55 and as low as $36.90.
GM Europe said negotiations fleshing out details of the new deal will be wrapped up soon. It added that it hopes to achieve "the vast majority of the targeted savings" next year.
The deal -- greeted with relief by the German government -- left German workers still looking for guarantees that their plants will survive beyond the next few years.
"The employee council's next target is to secure a contract that secures the future of the German Opel sites in the long term," Franz said.
At Opel's aging Bochum plant, where workers protested GM's October announcement of job cuts with a six-day walkout, the chief worker representative said Thursday's agreement failed to lift uncertainly among employees.
"No one knows whether they are affected or not. The mood is still gloomy," Dietmar Hahn said.
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