Opel could shut factories to survive

The head of troubled German car manufacturer Opel raised the possibility of closing plants in Germany to rescue the group in an interview to be published on Monday.

Opel could shut factories to survive
Photo: DPA

“If one thinks purely in terms of operating costs, and not in terms of individual jobs, it would of course be sensible,” Hans Demant told the weekly magazine Wirtschaftswoche.

“We want to do our utmost to avoid closures. Whether we will manage it remains to be seen,” he added.

For the moment measures to cut certain departments and jobs and reduce the wage bill were being envisaged, Demant said, adding, “We are aware that these are painful.”

Der Spiegel magazine reported earlier this month that Opel’s management planned to shut three facilities in Europe – two in Germany and one in Belgium – and sack 11,000 people, a fifth of its workforce.

The aim is to save some $1.2 billion dollars (€949 million) in staff costs, the magazine wrote. An alternative proposal would be to cut only 3,500 jobs but reduce wages across the board, it added.

Meanwhile the daily Bild on Saturday quoted the head of the works committee, Klaus Franz, saying that Opel employees were envisaging a joint operation with the group’s 2,000 concessionaires to buy 25 percent of the company.

They would be prepared to give up some of their wages to fund the project, he added.

Demant said bankruptcy was “not an option” for Opel, which was engaged in “very constructive discussions” with the government to obtain state aid amounting to €3.3 billion.

He said it was not a question of directly injecting cash into Opel but providing limited guarantees under a plan presented in late February that also foresees the German car maker gaining a large degree of autonomy from GM.

Labour Minister Olaf Scholz told the weekly Bild am Sonntag in an interview to be published on Sunday that “letting Opel die would be more than a mistake, it would be an unacceptable setback for the government.”

The cost would be billions of euros, the Social Democrat said, calling on Christian Democrat Chancellor Angela Merkel to promise Opel workers that they could count on the cross-party government.

Economy Minister Karl-Theodor zu Guttenberg said on Tuesday that GM was prepared to scale down its stake in Opel to a minority shareholding.

He said he had also sought guarantees from the US government that any German public aid for Opel would not be transferred to boost GM.

After meeting his US counterpart, Treasury Secretary Timothy Geithner, Guttenberg told reporters that “the glimmer of hope for Opel was becoming a bit brighter.”

But despite “considerable progress” in the talks, many unresolved issues remained, he said.


German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.