Examination of Witnesses (Questions 280
THURSDAY 11 JANUARY 2001
280. Can I draw your attention to the specific
wording of your company commitments. It says in paragraph 7, under
sub-paragraph 3, "Appropriate investment will be included
in Vauxhall's business plan and it is assumed that respective
grant aid will be sought. In the event of exceptionally adverse
changes to the economic environment which forces a reconsideration
of the plan, then the ....", Joint Negotiating Committee,
"... will commence talks on the actions to be taken in regard
of this." It does not seem as though that actually happened.
(Mr Reilly) As I say, we have been constantly talking
to them, but specifically relating to that, that was why we called
the Joint Negotiating Committee together on 12th December, which
was the first time we could get them together given the decision
was taken on a Friday night and we called them on the Monday to
get the meeting on the Tuesday.
281. But that was not a reconsideration, that
was a complete reneging on the previous agreement.
(Mr Reilly) It was to tell them what the situation
was and what the resultant action ought to be.
282. I think most people looking at the terms
of that agreement would say that you have broken the agreement.
(Mr Reilly) That is not our interpretation.
283. Is this not a bit of a play on words? You
have just responded to Mr Chope by saying that consultation and
all those issues were taking place, it does seem to me, listening
to you, there was an on-going dialogue about the difficulties
concerned with profitability and changes in the market, et cetera,
but it is not consultation to tell people in advance of the decisions
being taken. If the decision is taken and you tell them after
the event, that is a fait accompli. You can go through
the business of talking, discussing, negotiating, all of these
issues, but at the end of the day the decisions are taken in an
absolutely arbitrary way, with no discussion or consultation whatsoever.
(Mr Reilly) As I have said, we have been consulting
and discussing the situation on-going, and at the first opportunity
when these conditions became clear we called a meeting immediately.
284. And told them the decision had been taken.
"Hard luck, that is the end of it."
(Mr Warman) It is fair to say that throughout the
month of November we had been in intensive consultations talking
about options to try to deal with the situation as it was developing
at that time. Options like moving people towards IBC. We had been
in those talks throughout November.
285. Can I very quickly touch on the issue of
one of the factors involved, over-capacity in Europe? General
Motors in Europe have an arrangement or a collaborative partnership
arrangement with Fiat which may very well lead perhaps to a buying-out
of Fiat in its totality. My understanding is that there is a huge
amount of over-capacity in some of Fiat's plants, surely you would
only be exacerbating a problem which you say already exists if
the moves for taking-over Fiat go ahead. Can you provide some
explanation for that?
(Mr Reilly) First of all, there has been no indication
at all that General Motors intends to take any more of Fiat, and
Fiat have said very clearly that is not what they would desire.
The relationship with Fiat is driven by an attempt to take costs
out of both organisations by dealing in particular in engines,
power train activities and purchasing. To that end two joint ventures
were formed because it was realised we were both spending a lot
of money developing engine lines to do virtually the same job
in the same type of car and therefore we might be able to share
those components and reduce the costs, but then we would compete
in the market place car by car. That is the intent of that relationship.
There has been no statement we intend to increase the 20 per cent
share of Fiat.
286. But even through your collaborative arrangements
with Fiat, are you not buying into an arrangement where there
isand perhaps you could tell me whether there is or there
is notover-capacity in terms of Fiat's existing plants?
(Mr Reilly) As far as I know in power train there
is not an over-capacity in either of our plants. I do not know
the situation in Fiat's car assembly but that is not what we are
working together on.
287. Can I draw you out a little more about
the reason for the decision for the UK site closure? We have had
some evidence from you that there were not issues about productivity,
there were not issues about an over-reduction in the local market
as opposed to the rest of Europe, also it was not the short-term
issue of the low value of the euro. We have had suggestions right
the way across, from virtually every part of the UK community,
the workforce, the management, the supply chain, the local community,
that the reason the UK was chosen, that Luton was chosen, was
because the legislation here allowed that to happen and the legislation
would not have allowed it to happen in other parts of mainland
Europe. Can you explain to us why Luton was chosen?
(Mr Reilly) Because it was the only way General Motors
Europe could take out a significant amount of capacity in the
short-term. It is a question of which products we are talking
about and the product cycle, ie when you change that, and the
Vectra is due to be changed shortly. Therefore you cannot get
the same thing by considering the Astra, for example, which is
half way through its life. This particular segment, as I have
said, has declined, so we have gone from needing two plants for
production to only needing one and a half, or one and a flex-plant.
The only way you can get into a flex-plant is to take the volume
which Luton would have produced and put it into a different plant.
There is no other combination which could have got that answer.
288. So it is short-term reasons, it is because
(Mr Reilly) No, it is because of long-term reasons,
it is because of the long-term market decline of that segment.
Clearly the decision has to be taken in the relatively short-term.
289. But the UK seems to be treated on a par
(Mr Reilly) That is your interpretation. I have tried
to explain that is not the case. You forget that what I have said
already is that in the past, relatively speaking, the UK within
General Motors Europe has done extremely well.
290. We are talking about the present and the
(Mr Reilly)I am talking about the present and the
future. You may know that one of the plants which is being considered
for the flex-plant is another UK plant. If it was just the UK
which was being picked out, then
291. With all due respect, I am asking you about
the choice of closure.
(Mr Reilly) Yes.
292. I am not asking you about where you might
be allocating your additional half plant, I am asking you about
the decision to close Luton.
(Mr Reilly) You are asking me is that because General
Motors Europe is picking on the UK because it is easier in the
UK. I am telling you, no, that is not the case. I have explained
the reasons why it has to happen and, to support that view, General
Motors Europe is considering investing more in the UK.
293. What about the position of Russelsheim?
That is producing the alternative Vectra, the new Vectra, but
it is also producing the Omega. Is this actually because Germany
would not allow them, because of its legislation, to do what they
are trying to do in the UK?
(Mr Reilly) Russelsheim is down-sizing considerably
and closing several of its plants. It is taking its capacity down
from 470,000 to 270,000, which is approximately the same reduction
we are having in Luton. So it is again not true to say that Russelsheim
is being untouched by this. Both capacity and numbers of people
in Russelsheim are going down by at least as much as we are.
294. So in terms of the new Vectra, the Epsilon,
what impact is that going to have there?
(Mr Reilly) They are reducing the capacity they are
putting in for the Epsilon, for the Vectra and the replacement
295. By what capacity?
(Mr Reilly) By 200,000.
296. Would you say that the psychological impact
of the reductions in the Russelsheim area would be comparable
to those in Luton and the ending of car assembly here?
(Mr Reilly) If you take a perspective of several years,
I would think the impact is probably greater in Russelsheim. Certainly
the numbers of job losses have been greater there.
297. Just before we move on, I would like to
explore one last aspect of the decision-making processes within
GM International. We know globally there is over-capacity, decisions
are therefore taken at Detroit about reducing the level of losses
or the need to reduce the capacity in different parts of the world.
Was the agenda provided by Detroit for Zurich, which is where
I believe GM Europe meet, initially at the instance of Detroit
that Europe was required to find savings through a reduction in
(Mr Reilly) No.
298. Did you voluntarily lay yourselves down
on the altar and say, "Have whatever part of our anatomy
you would like to remove"?
(Mr Reilly) No, neither of those is correct. GM is
organised in four regions of the world and is basically run in
four regions of the world. GM Europe is in significant financial
difficulties, as is the automotive industry generally in Europe,
it is not just a GM problem. GM Europe has taken several decisions,
one of which is to improve its cost structure, but it is proposing
to reduce manpower by 5,000 people and is doing certain other
things. The decision was not taken in Detroit, the decision was
taken in GM Europe. Obviously it is ratified in Detroit.
299. If we were to sayI do not like using
it but it is not an inappropriate metaphorthe organ grinder
and the monkey (and I am not classifying you as the European monkey),
would it be more appropriate to go to the American organ grinder
for the last word?
(Mr Reilly) No, as I have said, the decision is not
made in Detroit. Detroit is the holding company, if you like.
Detroit runs North America. GM Europe runs Europe. Latin America
is run in Latin America. The organisations are expected to take
actions to ensure their long-term survival in those regions.