General Motors Company (GM) Wins a Round in Battle With Unions

A $750 million parting gift for workers
Rival Ford – like most of Opel’s European competitors – has had its own troubles in Europe. Ford lost $1.75 billion of its own in the region last year. Last fall, CEO Alan Mulally presented a plan to return Ford Europe to profitability.

Ford’s plan has several parts, but capacity cutbacks are a key component. Ford currently plans to close three of its factories in Europe. The company reached a deal with workers at one of those plants, in Genk, Belgium, last week. The deal provides for lavish separation packages for the workers — an average of $187,500 per worker, expected to cost Ford some $750 million over the next several quarters.

That’s a huge bill, but for Ford it’s worth it: Reducing production capacity is a critical part of Ford’s plan for returning the business to sustainable profitability. Just as the company shed factories and jobs in the U.S. in its painful restructuring last decade, so must it close factories – and make other structural changes – in Europe.

The takeaway for General Motors Company (NYSE:GM) watchers: Closing Bochum, or any other plant in Europe, could still turn out to be a costly move for GM. Stay tuned.

The article GM Wins a Round in Battle With Unions originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of General Motors and Ford. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors.

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