In These New Times

05/28/2009 

Derspeigel

Despite an entire night of non-stop negotiations in Angela Merkel’s Chancellery, there is still no plan in place to save Opel from following GM into bankruptcy. The problem, say Berlin politicians, is a lack of transparency — and a surprise 300 million euro demand — from the Americans.

By the end of the night, following almost 11 hours of negotiations aimed at finding a way to save the crisis-plagued carmaker Opel from the clutches of bankruptcy, Germany’s political elite looked exhausted. It was 4:15 a.m. on Thursday morning by the time the team emerged from the Chancellery, and most eyes had dark rings under them. Finance Minster Peer Steinbrück even mumbled something about how desperately he needed sleep.

REUTERS

Chancellor Angela Merkel (third from left) with members of her cabinet during late night negotiations on the future of Opel in the Chancellery on Wednesday night.

But exhaustion wasn’t the only problem. The talks, as quickly became clear, had failed. And as deep and dark as the rings under most eyes were, the flash of anger was likewise unmistakable — anger at Germany’s negotiating partners from the US.

Roland Koch, governor of the state of Hesse, which plays host to Opel headquarters, complained that the American role in the negotiations “was not exactly helpful.” Economics Minister Karl-Theodor zu Guttenberg said “once again General Motors confronted us with surprises.”

‘Absurd’ Negotiations

With the US automobile giant General Motors facing imminent bankruptcy in the US, Berlin is doing what it can to prevent its German subsidiary Opel from going down with the ship. In addition to courting possible investors interested in buying a majority stake in Opel, Berlin — in conjunction with the governors of the three German states which Opel factories call home — is likewise trying to lubricate the sale with bridge financing to the tune of €1.5 billion ($2.07 billion).

DER SPIEGEL

GM’s European operations.

But on Wednesday night, General Motors made a surprise demand for an additional €300 million ($415 million), catching German negotiators off guard. To make matters worse, the US had only bothered to send a low level representative who frequently had to confer with his superiors in Washington.

Complaining that the night had been “absurd in parts,” Guttenberg also said that he expected “more seriousness and a greater willingness to compromise on the part of the US.”

GM has in principle agreed to shed itself of Opel, but will make the final decision regarding a new investor. It is up to the German government, however, to decide on whether the new investor should receive temporary government support. Both the Italian carmaker Fiat and the Canadian auto parts supplier Magna are still in the running while US financial investor Ripplewood Holdings LLC has reportedly withdrawn its offer. Guttenberg says more information from GM and from the US is needed before any decision can be reached and spoke of Friday as being “the absolute deadline.”

Slow-Motion Collapse

The issue has attracted massive attention in Germany, first and foremost because of the risk that thousands of jobs could be lost. Opel employs 25,000 people in Germany with many thousands more dependent on the company for their livelihoods. All of the potential investors currently courting Opel and Berlin have said that some job cuts would be unavoidable.

And they wouldn’t just be in Germany. GM’s Europe division employs a further 25,000 people elsewhere in Europe and many countries have become angry that Germany has reserved a dominant role for itself when it comes to the future of GM’s European subsidiaries. It came out on Wednesday that Belgian Prime Minister Herman van Rompuy wrote to the European Commission urging the EU to make sure that a decision regarding the future of GM’s holdings in Europe, which include Britain’s Vauxhall, be fair to all involved. Belgium also plays host to an Opel factory, employing some 2,500 workers. According to a report in the Financial Times, EU rules may require that Opel cut capacity by up to 30 percent in order to balance out the distortion of competion any government aid would bring with it — a cut that would likely result in massive job losses.

According to a report in the business daily Handelsblatt, the German government has requested that any new Opel investor guarantee jobs in Germany. Such a guarantee, should it only apply to Germany, could violate EU rules, the report says.

Ongoing GM efforts to find a buyer for its Swedish subsidiary Saab are unconnected to the Opel negotiations.

Making things more complicated in Germany, however, is the ongoing general election campaign in Germany — and the ongoing recession. With the vote set for September, neither Chancellor Merkel’s Christian Democrats, nor Peer Steinbrück’s Social Democrats want to be seen as standing by as Opel sinks. But, if Berlin does too much, it could set an uncomfortable precedent given the numerous other large firms in Germany which are facing significant financial difficulties.

The sports car icon Porsche, for example, is teetering on the edge of bankruptcy and may need public help. The ball-bearing giant Schaeffler and the retail conglomerate Arcandor, both large employers in Germany, are likewise far from healthy. And with the economic crisis still in full swing, there may be more to come.

Short Half-Life

Merkel’s Christian Democrats (CDU) have been doing what they can to present their efforts on behalf of Opel as mere coordination between GM, Opel and the potential investors. Guttenberg, from the CDU’s Bavarian sister party, the Christian Social Union, has shied away from direct government investment in Opel and has even held out bankruptcy proceedings as a possible outcome.

The Social Democrats, for their part, have steered a more populist course. Finance Minister Steinbrück has largely avoided such electioneering, but Foreign Minister Frank-Walter Steinmeier, who is also the SPD’s candidate for the Chancellery, was quick to throw his support behind direct government investment in Opel. He has also recently blasted Guttenberg for moving too slowly and in February, Steinmeier paid a visit to Opel headquarters to express his solidarity with the workers.

Yet even as Steinmeier opens himself up to charges of shallow electioneering, it still seems that Merkel’s CDU has the most to lose. Were the Opel negotiations to fail and the carmaker to go out of business, she and her economics minister would likely bear the brunt of the blame. Furthermore, the three German states where Opel factories are located are all governed by senior Christian Democrats.

For now, though, the US has managed to succeed where Berlin’s political elite has failed for months: getting the CDU and SPD to agree. Both parties are unified in their excoriation of America’s role in Opel negotiations thus far. “It seems to me,” said Steinbrück on Thursday morning, “that transparency is in short supply on the US side. The half-life of the information received by Germany is very short.”

cgh — with wire reports