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G.M. Picks Germany, Not Sweden, as Home of New Saabs
By MARK LANDLER
Published: March 5, 2005 copyright New York Times
ÜSSELSHEIM, Germany, March 4 - For the last several months, this humdrum German car town has vied against a prettier rival, Trollhattan in Sweden, for the affections of General Motors as it deliberated about where to build its next generation of cars in Europe.
On Friday, G.M. made its choice, and announced it would build midsize Opels and Saabs in Germany rather than in Sweden.
For Rüsselsheim, which has been in a panic since last fall when G.M. announced that it would cut nearly a fifth of its European work force, the decision was a deep relief. For Trollhattan, home of the proud but fading Saab brand, it was a bitter introduction to the new realities of the global auto industry.
"Both facilities put their best foot forward," said Fritz Henderson, the chairman of General Motors Europe. "In the end, the business case for the Rüsselsheim facility was approximately 200 million euros more cost-effective than that of the Trollhattan facility."
That translates into $262 million at current exchange rates - no small amount for G.M., which is trying to wring 500 million euros ($655 million) in cost savings a year out of its money-losing European operations.
At a time when Western Europe is fighting to save manufacturing jobs in the face of low-wage competition from Eastern Europe, the beauty contest between Sweden and Germany became heavily politicized.
Prime Minister Goran Persson of Sweden traveled to G.M. Europe's headquarters in Zurich to lobby Mr. Henderson for Trollhattan. Sweden offered to improve road and rail links between the plant and the port city of Gothenburg, which drew cries of foul from German officials.
General Motors awarded Trollhattan a consolation prize, saying it would build a new Cadillac there for the European market, as well as maintain production of current Saab models. But with Cadillac's success in Europe by no means assured, analysts said the Swedish plant faced a murky future.
"They're going to stop producing cars in serious volumes in Trollhattan," said Ferdinand Dudenhöffer, the director of the Center for Automotive Research in Gelsenkirchen, north of Düsseldorf. "They'll keep a base in Sweden for design and development. But the plant will end up becoming a museum."
Starting in 2008, Saab's new midsize car will be produced in this suburb of Frankfurt, built on the same frame as an Opel. Critics say that moving Saab production out of Sweden risks diluting one of the auto industry's quirkiest brand names. G.M. and some analysts disagree.
"We are in a world where the customer doesn't ask the question, Where is this car made?" Mr. Dudenhöffer said. "The BMW and Mercedes S.U.V.'s are American-made cars, and it doesn't matter."
G.M. dispatched its top European executives to Trollhattan, in southwestern Sweden, to break the news. A representative of the workers said they were frustrated that the company did not offer more details about how many jobs would be preserved. Still, while the employees were disappointed and nervous about the future, they were relieved that the plant would stay open, at least until 2010.
"It could have been worse," said the leader of the factory's workers' council, Paul Akerlund, in a phone interview. "In this business, you don't have a guarantee for more than three to five years."
At the headquarters of the Opel division, employees lined the balconies of a four-story glass atrium to listen to their chief executive, Hans Demant, explain why they won the bake-off.
A crucial ingredient was a new job contract that reduced annual wage increases, or in some cases froze wages, and made labor rules more flexible. Workers can now be required to work 30 to 40 hours a week, without being paid overtime beyond the normal 35-hour workweek.
Opel and its union also agreed on a plan to reduce the work force by 9,500 by the end of 2007.
The carmaker said 4,500 people volunteered to leave this year, which helped G.M. to avoid forced layoffs.
"This is unique in German industry," Mr. Demant said in a brief interview. "We have never done this before."
Rüsselsheim's location in the center of Western Europe was another element in its favor, he said, as was the fact that Opel built a technologically advanced production line on its sprawling site here in 2001. The plant can turn out 60 cars an hour, nearly double the rate of the Saab factory.
Still, given the vagaries of today's auto industry, Mr. Demant said Rüsselsheim's security was not guaranteed indefinitely. The labor agreement runs through the end of 2010, and Mr. Demant said substantial changes in the industry could force G.M. to revisit its plans for the plant.
"There is new competition coming from the East, and we will have to take that into account," he said.
Up in Trollhattan, the local officials seem to be rolling with the punches of the global economy. The municipal Web site extols the famed waterfall and the picturesque canal. But it makes more of the town's growing popularity as a location for movies than for car production.
The Danish director Lars von Trier shot two of his recent films, "Dancer in the Dark" and "Dogville," in Trollhattan - helping to give Sweden's former Motor City a new nickname, "Trollywood."
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