Opel - Fiat Merger Could Reduce Workforce

FRANKFURT, Oct 16 Reuters reported that a merger of the auto division of Fiat <FIA.MI> with General Motors' Opel unit would mean big job cuts for both groups, the online version of a German magazine quoted Opel's workers' council chief as saying on Wednesday. Fiat last week announced over 8,000 layoffs in a move which analysts said reflected the scale of its problems. The auto division is expected to make a loss of more than one billion euros this year.

Klaus Franz, the workers' council chief at Opel told Spiegel Online the problems at Fiat were just the "tip of the iceberg" and that there would be further job cuts and plant closures there. Adam Opel is the German unit of General Motors Corp.

If Opel merged with Fiat there would be "enormous job cuts for both sides", the magazine quoted Franz as saying.

The struggling Italian group has a put option allowing it to sell the remaining 80 percent of its loss-making auto unit to the world's biggest automaker from 2004.

GM wrote down $2.2 billion on its 20 percent stake in the auto unit on Tuesday, having paid $2.4 billion for the holding in 2000 and most analysts think a merger with Fiat Auto would damage GM's chances of recovery in Europe.

GM is itself in the midst of restructuring its European operations including thousands of job cuts and new model launches.

Franz, known for his outspoken comments, told Spiegel Online he feared the current restructuring at Opel would be put back by a merger with Fiat and that Opel would have to make more savings as the Fiat turnaround would cost over ten billion euros.

"For us, niche models could be cut and plans for cars which have not yet been announced might be put to one side," he was quoted as saying.

Spiegel Online also reported Franz as saying it was possible GM would only keep the Fiat brands that had potential in the U.S. market, mainly Alfa Romeo.

"What remains of Fiat then and whether the brand survives is another question," Franz was quoted as saying.

No one at Opel or at the workers' council was immediately available to comment.