Adam Opel and German Reunification

Darral G. Clarke

Professor of Management

April 18, 2000

Wall DownPrior to Reunification

• VW joint venture with IFA Kombinat PKW (including Eisenach)– Trade engines for TKD assembly, sales of VW in eastern Europe– Bigger investment planned

• Exploit protected market, low wage costs

• Liedtke, Director, Eisenach, persuades Ministerium to OK joint venture with Opel

• GM makes small investment in Eisenach– Trade engines for TKD kits in Eisenach for sale in eastern Europe– Bigger investment planned

• Exploit protected market, low wage costs

Changes Resulting from Reunification

• Eastern block markets are open, especially East Germany (EU membership) so protected market is gone

• West German unions drive wages up, parity in 2-4 years

• Monetary union puts money in ossie’s pockets• Joint venture investment must now compete on

globally competitive terms– Market, labor costs, investment costs, government

subsidies, labor force capabilities.

Eisenach Wins

• GM builds its most modern, efficient automobile factory in the world– Biggest investment in Eastern Germany (1billion DM)– Opportunity to introduce Japanese lean manufacturing

to Europe

• Eisenach provides opportunity to circumvent most of problems with West German investment– skilled but desperate workforce, pliant unions– Generous local administration, greenfield site– Initially lower wages

Eisenach Results

– 18 hours to make Astra in Eisenach, (28 in Bochum), 33 in Zaragoza)

– 6-7 defects in Eisenach, 20 Bochum– 150,000 cars with 2000 employees– Absenteeism 3% compared with 10% in

western German plants