How Opel is suffering from low interest rates

Opel wants to reorganize company pensions in view of low interest rates and the corona crisis. The works council speaks of an attack on pensions. There are huge sums involved.

Need to speak: Wolfgang Schäfer-Klug, Chairman of the Opel Works Council in Rüsselsheim, and CEO Michael Lohscheller (right)

Be Opel in Rüsselsheim is once again about money. After the partial sale of the development center, the shedding of thousands of jobs without redundancies and a dispute about the future of training, management and employee representatives are not only wrestling over the transmission plant and the forge at the headquarters, but also over company pensions.

Company pension schemes alone are worth three-digit million sums a year. Personnel manager Ralph Wangemann startled the Opel workforce with the message that the car manufacturer was aiming for a “fundamental modernization of our company pension scheme”. It is “absolutely necessary in order to be able to pay future-oriented pensions in line with the market”. So far, the carmaker has promised a comparatively lush five percent interest.

Wangemann speaks of “necessary adjustments” as a result of the Corona crisis and the change towards electromobility. In the future, Opel will also build two models with electric drive at its headquarters, the Astra and a DS, each as a plug-in hybrid. But when managers choose such words, one thing is clear: the employer is planning cuts.

“Attack on the Opel pension scheme”

The representatives of IG Metall in the works council speak of an attack on the Opel pension scheme. There was great indignation about this in the workforce. Due to the massive job cuts and the lack of prospects for the future, “many areas of the company have already lost their ties to Opel” continues to decline. The general works council rejects “the deterioration in old-age provision”. By shedding thousands of jobs, Opel is reducing costs anyway, he says. In addition, the former parent company General Motors had borne the lion’s share to finance the company pensions.

However, this reference to the commitment of the Americans is only true for a certain period of time. General Motors financed the company pensions up to the cut-off date of the sale of Opel to PSA, as the automaker says. Since the late summer of 2017, Opel has had to take care of the money for the company pension itself.

What that means can be seen in the annual financial statements of Opel Automobile GmbH. Accordingly, the car manufacturer had to pay a good 180 million euros in interest expenses from the pension obligation in 2018. That means: He had to add this amount in order to be able to offer the promised interest, as it is called. How high the subsidy requirement was due to the low interest rates last year will be stated in the 2019 annual financial statements, which have not yet been published. However, it is said in Rüsselsheim that the sum was not significantly lower.

It should therefore decrease somewhat because Opel has reduced its workforce. But the bottom line is that there is again a threat of a three-digit million subsidy. Because nothing fundamental has changed in terms of low interest rates. “This is not a sustainable and competitive list of a company pension plan”, it says in a letter from the management to the workforce.

Many employees also know that five percent is a proud interest rate. Quite a few employees who only moved to Opel in the past five to ten years are said to have rubbed their eyes in delight at this interest rate promise. The Höchst pension fund, for example, recently spoke of less than four percent that it generated net. The press coverage for media representatives is around 3.5 percent; a few years ago it was four percent. For comparison: the guaranteed interest rate for life insurance is currently 0.9 percent.

Pfandbriefe, supermarkets, old people’s homes

The pension funds are burdened by the low interest rates, safe federal bonds, for example, do not pay any interest. For this reason, a few years ago, the Höchst Pension Fund relied not only on long-term interest-bearing securities but also on Pfandbriefe, which are secured with real estate, and on bank bonds. In addition, there are real estate assets such as retail and logistics buildings as well as old people’s homes.

How Opel comes to the interest on the contributions to the company pension scheme and whether the pension fund managers in Rüsselsheim act similarly to those in the west of Frankfurt, the car manufacturer keeps to himself. A spokesman only lets you know: “Through an appropriate mix and diversification of the investments, a limitation and compensation of the risks between the selected investments takes place.” A strategic distribution of the assets, called asset allocation, is based on the long-term return and risk expectations on the Capital market. Regardless of this, the carmaker does not itself take care of the weal and woe of company pensions. He has outsourced these tasks. According to the 2018 annual financial statements, the service provider is Allianz Treuhand GmbH, a subsidiary of the Allianz insurance group.

“Adjustments on all hierarchical levels”

Regardless of this, all acquired claims to the company pension scheme are covered, as Opel continues to say. In addition, the management emphasizes: “Of course, adjustments will affect all hierarchical levels of Opel Automobile GmbH in Germany – including the upper management.” This is a matter of course, since the same system applies to all hierarchical levels. And it is also known to the works council.

In doing so, she answers indirectly to IG Metall in the works council. In a leaflet she had asked the workforce: “Where is the contribution made by Opel management to the crisis described by management? For example, are cuts in their retirement pensions planned? ”Opel said that many managers had donated a significant part of their bonuses to the Groupe PSA Foundation, the foundation of the parent company.