A German view of the Opel-Magna debacle

[Toto]

From the German Spiegel Online site.
A Disgrace for the Populists

An Editorial by Severin Weiland
11-04-2009

Magna, Magna, Magna. German politicians became so transfixed on one solution in the crisis at Opel that they fell into the populism trap and lost touch with reality. Now the government in Berlin is being shown, painfully, that it can't force General Motors into a deal it doesn't want. The episode shows the German government faces in trying to save companies.

A wave of outrage is breaking across Germany. The news that General Motors has decided not, in the end, to sell Opel as planned has many giving voice to their indignation on Wednesday. The governer of the western German state of Hesse, where Opel's headquarters and largest plant is located, Roland Koch, said he was "deeply shocked" and "angry." His counterpart Kurt Beck, from neighboring Rhineland-Palatinate, also home to an Opel plant, spoke of an "impertinence." And Jürgen Rüttgers, governor of North Rhine-Westphalia -- befitting his current re-election campaign -- outdid them both, saying that the behavior of the US company shows "the ugly face of turbo-capitalism".

German Chancellor Angela Merkel, who on Tuesday gave a well-received speech before a joint session of Congress, has so far held her tongue. The news reached Merkel just minutes before she was set to take off for her flight home -- her aides attempted to contact White House officials immediately.

A Black Eye for Merkel

The news is a debacle for Merkel. The chancellor has invested massive amounts of political capital in the attempt to save Opel, presenting herself and her government as the savior of German jobs. Merkel had her doubts about the wisdom of springing to Opel's aid, to be sure, but she kept them quiet, as is her wont.

When it became clear that Opel was to be sold to Magna, the Canadian-Austrian auto parts supplier and its Russian partner, then it was the chancellor herself who announced the news in a relaxed atmosphere in the Chancellery. And she even did something she never usually does -- she accepted personal responsibility for the success. "Patience, single-mindedness and clarity," had paid off, she said proudly.

For a brief moment Merkel was acting like the former Chancellor Gerhard Schröder -- and promptly ended up with a black eye. There is no way out of this for the mistress of wriggling around things. The failure of the Opel rescue plan is above all Merkel's failure.

And from the very beginning it looked highly unlikely that state intervention was going to succeed here. Everyone involved knew that. Opel is ailing. There is a massive oversupply of cars on the global market. Experts frowned and there were doubts in the Economics Ministry that state aid and selling off to another investor would be the right path. These doubts were expressed during that long night in May when then Economics Minister Karl-Theodor zu Guttenberg of Bavaria's conservative Christian Social Union (CSU) party called into play the possibility of a well-ordered insolvency. The politician, who was only new to his post, lost his nerve that very same night after the chancellor took him to task. The risks of an insolvency would be "politically irresponsible," Merkel concluded. However, it would most likely have been the most honest thing to do, and possibly the best thing for Opel."

More here: http://www.spiegel.de/international/...659317,00.html

[stormwatcher]

It's important to rememer that no matter how big a soap opera this became, the German government did provide the emergency loans that kept Opel alive, and it is only because the German government will provide taxpayer funded loans to assist GM in restructuring that GM has this second chance at keeping Opel in the fold.

[rueben44]

Yes they were not operating on GM's behave but in their own self interest without being fair minded. Opel sales have been up so they really need to stop with the bits about that. Also they have excellent cars now so that is not the issue. The issue is with the cost of operating in places like German. Gm needs to move manufacturing ASAP!!!

[msitter]

Does anyone really give a rats behind what the Germans think? The German workers should just be happy that Opels are not being made in China. Obama thinks that the American business model should more reflect what goes on in Germany, that would decimate all manufacturing here in the US. It is far easier to move to China from here than it is in Germany. The Germans should just be happy that someone wants to make Opels in Germany rather than taking the factories to the third world. The cradle to grave mentality of the Germans has killed all incentive to be creative.

[vanshmack]

When government gets involved in trying to "save" private business, this is the kind of outrage that you'll see when the government doesn't get it's way.

[ChevyRules]

"Magna, Magna, Magna. German politicians became so transfixed on one solution in the crisis at Opel that they fell into the populism trap and lost touch with reality. Now the government in Berlin is being shown, painfully, that it can't force General Motors into a deal it doesn't want. The episode shows the German government faces in trying to save companies."

That line could not be more true. GM was willing to sell Opel, but they obviously made it clear they did not prefer Magna offer, but was forced to choose it by the German government. Now sadly, it will be the Germans who will be sorry as I bet GM is going to be dishing out some revenge to Germany for the hassle they made them go through.

[crooner214]

Lobbyists buy government, but government doesn't buy business. I can't blame the German GV for being upset, but I also can't blame GM for keeping Opel. Besides, did we really want Opel to fall into the hands of anyone else?

BTW, Toto, that pic made me laugh out loud, and I'm at home alone. My neighbors must think I'm batty!

[eaton53]

Originally Posted by crooner214

BTW, Toto, that pic made me laugh out loud, and I'm at home alone. My neighbors must think I'm batty!

Merkel's channeling her inner Baron von Raschke!!

"You vill sell to Magna or I vill give you Ze Claw! ZE CLAW!!!

[Quest]

I would not be surprised if behind the scenes and when the cameras are turned off a lot of the political players are happy that they are off the hook. The changes made to the deal to get GM’s grudging acceptance required that Berlin assume more of the financial risks for the Magana/Gaz takeover. There was an almost tacit acknowledgment that more money would have to be put into Opel down the line and that they were assuming more of this potential burden. At first the plan was to make GM assume any future financial shortfalls which was a nonstarter for the company and rightfully so considering they were expected to relinquish 65% of Opel.

Any extension of reorganization financing to facilitate Opel’s turnaround can now be contemplated under a stringent business framework. Berlin gets off the hook of taking on a charity case and can now at least set some sensible boundaries as to what it’s prepared to do, if anything, to help fund an Opel reorganization in the short-run. In essence assuming the traditional function of a genuine lender but with fiduciary responsibilities to the citizens of Germany; GM now has to make a genuine business case for any help. This is the way it should’ve been from the very start not this digression into populism and political maneuvering.

[jcgable]

Originally Posted by msitter

Does anyone really give a rats behind what the Germans think? The German workers should just be happy that Opels are not being made in China. Obama thinks that the American business model should more reflect what goes on in Germany, that would decimate all manufacturing here in the US. It is far easier to move to China from here than it is in Germany. The Germans should just be happy that someone wants to make Opels in Germany rather than taking the factories to the third world. The cradle to grave mentality of the Germans has killed all incentive to be creative.

The German business model has many attractive benefits, as does the American business model. This isn't a forum to debate the macro-economic policies of governments.

[Bravada]

Merkel is the un-hooded version of Palpatine, simply!

[mgescuro]

Originally Posted by jcgable

This isn't a forum to debate the macro-economic policies of governments.

But alas, many people will start doing so anyways, whether or not they are educated in macroeconomic theory.

[jbernie]

I think the Germans are crying foul more because with GM being (appearing to be) able to go it alone there is a greater potential for more job losses in Germany than under the previous plan being forced on GM with Magna & Co buying and the non German Opel factories taking the brunt of the job losses.

Publically they are all crying foul, privately they are all probably very happy as the cost of unemployment to a few thousand workers is much less than shelling out billions in loans etc which could not guarantee 100% that the company would survive, it would only have a good chance to survive.

[goochman]

If the Germans can find 4,000,000 more buyers of Opel's then the job losses wont happen. If they can't find alot more buyers then there is no reason to keep the factories running - unless the German Govt wants to pay their salaries while things are idle the next 5 years.

[stormwatcher]

Originally Posted by ChevyRules

Now sadly, it will be the Germans who will be sorry as I bet GM is going to be dishing out some revenge to Germany for the hassle they made them go through.

Dishing out revenge for the emergency bridge loan that the German government provided to keep Opel afloat and without which Opel would already be in bankruptcy and likely out of GM's control forever?

People have some awfully strange ideas floating around on this subject. Without the generosity of Korean, Canadian, German and US taxpayers, GM would be toast by now. A little less hubris might be in order.