GM Looks Set to Sell French Transmission Plant to Belgium Firm

PARIS – General Motors is on the point of selling its GM Strasbourg transmission plant in eastern France to Punch Metals International, a private company based in Belgium that, unlike the auto maker, has managed to find a future product for the plant.

Punch Metals plans to build an 8-speed automatic transmission for ZF Friedrichshafen starting in 2014, the year that GM’s commitment to buy 200,000 transmissions annually runs out. No figures have been released, and the sale is not certain, but GM and Punch are in exclusive negotiations and plant officials hope a deal will be finalized by year’s end.

“We confirm that we announced to the workers’ council that GM is in effect in exclusive discussions with Punch Metals International in the framework of a long-term partnership agreement between this potential buyer and ZF,” GM Strasbourg says in a statement. "Punch’s project with ZF is for fabrication at GM Strasbourg of a new generation 8-speed transmission that could be produced beginning in 2014.”

Although it has no experience in transmission production, Punch Metals does have a customer in ZF. Guido Dumarey was the CEO of the conglomerate Punch International that bought a continuously variable transmission factory from ZF in 2006. Dumarey left Punch International in 2009 but kept Punch Metals International as a private company.

Punch International spun off the CVT operation, known as Punch Powertrain, to other investors, who have expanded to China and apparently are doing well.

When Dumarey left Punch International, analysts at KBC Securities wrote to their clients: “His departure as CEO is likely to have an important impact on the group, as he was the deal maker of Punch International. His leaving will probably lead to a more stable group, with less buying and selling of businesses.”

The transmission plant is an anomaly in GM’s organization. Although it is located in France, it is not part of its European operations. The plant, which has its own engineering center, makes automatic transmissions for export to BMW and to GM in the U.S. Production in 2011 totaled about 280,000 units.

During GM’s 2008 bankruptcy, the plant was put into Motors Liquidation, the unit charged with getting rid of unwanted GM operations. However, the plant’s 1,000 workers continued to come to work, fulfilling existing orders. In 2010, GM bought the plant back from Motors Liquidation for a symbolic €1 ($1.30) after the workers made salary concessions in exchange for an order book going to 2014 and a promise to look for a future product.

When GM didn’t come up with a new product for the plant, it was put on the market again.

Punch Metals, which was interested in the facility during its Motors Liquidation days, came back into the picture again. On Nov. 23, the plant’s workers council officially was told of the sale plans.

Union leaders essentially are happy the operation appears to have a future that will take it past the end of the decade, but at the same time they are not sold on the concept of trading General Motors for Punch Metals as the plant’s owner.

“We are skeptical,” CGT Union leader Roland Robert says. “Why is it that a big group like General Motors can’t put together an industrial project while a little one succeeds? It’s a little bizarre.”

If the deal goes through, it will be a case of the minnow swallowing the fish.

Punch Metals has acquired two French metal working companies this year. It also has two plants in Belgium and one in Slovakia.

The general manager of the two French sites, Bart Gruyaert, says the factories in Crepy-en-Valoise and Montataire specialize in folding, stamping, punching and fine blanking.

In April, when Punch Metals finished buying the French company Juy, which supplies metal components to the off-road vehicle industry, Les Echoes reported Punch Metals had annual sales of €72 million ($93 million), profit margin of 4% and about 400 workers.

“Having started my career as a simple mechanic, I attach particular importance to training of workers, which is a measure of competitiveness,” Dumarey told the newspaper at the time. “I want to raise the capacity of innovation in the company, and that's why we're going to add a research center which will eventually include 50 people.”

At the second French factory that Punch Metals purchased in Montataire, it stopped making forklifts and switched to metalworking, cutting the staff in half to 115, but the promise of retaining that many workers prompted France and the region to loan the company €3.4 million ($4.4 million).

“Dumarey is an entrepreneur,” says Tom Simonts, a senior equity analyst at KBC Securities who follows Punch International. “He is a very good visionary, but he needs a very strong (chief financial officer) or controlling board of directors. (At Punch International) he took too many risks once in a while.”

However, from the workers point of view, and that of France, the Punch Metals-ZF offer is the best of a dozen received, as none of the others guaranteed employment for all of the plant’s 990 workers.

The project “could have a result favorable for the site and the workers,” Jean-Marc Ruhland, leader of the CFDT union at the plant, tells L’Usine Nouvelle, a French industry magazine. He says the new transmission project will require investment of at least €150 million ($195 million).

“It’s the transition period that is going to be the most dangerous, considering that there will be a minor overstaffing,” says Ruhland, as GM’s contract for 200,000 transmissions annually through 2014 is well below the 2011 production of 280,000. “Perhaps we will have some training periods or technical unemployment, but it will be for a good cause.”