Opel likely to turn out the lights out in Bochum

FRANKFURT (Reuters) - Charts plastered on a corridor across the office of Opel's factory director in Bochum show a car plant working flat out, although the figures are hard to make out in a hallway where the lights are turned off.

Gloom in the main administrative building underlines one of the two major problems facing the plant in Germany's depressed Ruhr region: sky-high energy costs, which along with expensive labor are threatening its existence.

Opel's U.S. parent, General Motors has abandoned its goal for profitability in Europe this year after losing about $750 million there in 2011. Now it wants to end chronic losses at its Opel and British Vauxhall brands once and for all by weeding out one of its three car assembly plants in Germany.

But with GM now a hot topic in campaigning for the U.S. presidency thanks to its controversial taxpayer bailout three years ago, the fate of plants even in faraway Europe has become politically highly sensitive.

Bochum, built half a century ago on the site of an abandoned coal mine and with an annual energy bill of almost $50 million, is most at risk as it struggles to compete with more modern GM plants to the East.

"Bochum's manufacturing costs per vehicle are still the highest in Europe and that's despite running three shifts at full capacity," said a source familiar with the matter, citing a figure which its workforce disputes.

Unable to lower labor costs, plant managers are desperately trying at least to turn Bochum into Opel's most energy-efficient plant as the jobs of its 3,300 workers hang by a thread, and this includes switching off the lights in the corridors.

Relying where possible on the sun to illuminate the 50-year-old manufacturing halls through massive skylights and two storey windows, assembly line workers are churning out about 660 vehicles daily - making Bochum the only Opel plant in Europe to run close to capacity.

However, costs remain so high that signs everywhere urge employees to remember to use electricity sparingly. Every day a two-hour site inspection is made to ensure there is no waste.

SELLING ON THE CHEAP

Round-the-clock production masks another of Bochum's problems - the kinds of vehicles it makes.

It mainly builds the profitable and fashionable Zafira Tourer MPV, but too many of the cars coming off the production line are older generation models which are made in high-cost Germany but sold in Russia, Turkey and other emerging markets on the cheap just to prop up output.

"The economics of the plant will likely deteriorate in the future if Zafira Tourer volumes are too small to compensate for the complete phase-out of older models like the Astra Classic in 2014 and Zafira Family in 2015," said the source.

GM believes Opel's remaining five car assembly plants, some outside Germany, could be so much more efficient if they too were run in three shifts around the clock.

But, barring a sudden surge in demand, this would be possible only if one factory were shut. GM's board may therefore agree after a shareholders' meeting on Tuesday at its headquarters in Detroit, Michigan, to swallow the heavy closure costs and turn the lights out forever in Bochum.

President Barack Obama is already arguing with his Republican challenger Mitt Romney, whose father was governor of Michigan, about the $80 billion bailout of the U.S. auto industry in 2009. The U.S. Treasury still owns about a quarter of GM and any big redundancy payout for German workers could prove incendiary in campaigning for the 2012 election.

Straddling the old Dannenberg coal shaft, production at Opel Bochum's "Werk I" is likely to end as early as 2015 and at the latest when the Zafira Tourer's model lifecycle runs out at the end of 2016. The nearby transmission plant known as "Werk II" is already scheduled to be shut by December 2013.

While Bochum's production has halved in the past three decades, the plant itself has not shrunk. A big problem is all the money wasted heating, ventilating and powering entire factory halls when only part of the space is needed.

For example, Werk II sprawls over half a square kilometer but less than a tenth of that space is used to make F13-plus transmissions, a type of gearbox used for cars powered by engines of 1.6 liters or less.

"Annual energy costs of 39 million euros play a very big factor in the costs per vehicle," Opel Bochum's energy chief Michael Hey said in February in a staff newsletter entitled "Lights Out is Not Enough".

Bochum cannot compete with its newer, more compact Opel stable-mates such as Eisenach, built in the former communist East after German re-unification in 1990, and Gliwice in Poland.

There distances are short from the body and paint shop to final assembly. Even the older Ruesselsheim plant in western Germany has overhauled its layout so trucks can deliver auto parts at loading bays only a few meters from the assembly line.

WAGE BILLS

Wage bills, which account for 70 percent of manufacturing costs, are likewise much lower in Poland than in Germany, where pay deals are struck across entire industries, for instance.

The IG Metall trade union has just negotiated a 4.3 percent pay rise for the German manufacturing industry. While profitable companies may be able to afford this, many workers at Opel Bochum would probably trade the higher wages for job security.

Unemployment in the Ruhr region, the historic heart of German heavy industry, is above the euro zone average of 11 percent, let alone the German rate of just below seven percent.

Bochum's staff cannot offer concessions without the consent of the union. But IG Metall officials say they don't trust GM and fear that any deviation from the pay deal would encourage a race to the bottom among carmakers through wage dumping.

That leaves Rainer Einenkel, Bochum's battle-tested works council chief, with little leverage apart from demographics. Offering severance packages for staff who have worked at the plant for 25 years on average would be very costly.

"It would be the most expensive plant closure in history," he warns, calling instead for GM to shift production of 40,000 Chevrolet Orlando MPVs to Bochum.

Sandwiched between GM and IG Metall and facing grim job prospects, the workforce has become rebellious - breaking ranks even with its union. Opel's former labor leader Klaus Franz would often complain about "The Independent Republic of Bochum" and his relationship with Einenkel was strained.

Opel Bochum's plight has provoked outrage in the local community, with German rockstar and actor Herbert Groenemeyer, who grew up in the city, telling concertgoers last month that the plant must be allowed to survive.

"Many of us from Opel were at your concert in the stadium and were enthusiastic and proud when you dedicated your Hymn to Bochum during the concert to the Opel workforce," Einenkel told Groenemeyer in thanks. ($1 = 0.8021 euros)

(Editing by David Stamp)

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