German governments have long relied on (and often ignored) the advice of a council of economic advisers, called the “Five Wise Men”. Peter Bofinger is a member of the council. According to Spiegel Online, he says the only way to deal with Opel’s problems is to nationalize the company– and forget about the billions that GM reportedly owes Opel. Bofinger says there are two important reasons why this is the only way to go. Once the markets stabilize after a few years, Germany would be able to sell Opel again, and regain some or all of its investment. And that sure beats pouring money down GM’s drain. Secondly, nationalization is a deterrence to the many other companies asking for help, and the scores of companies that are expected to grovel for billions in the months to come. Picture this dialogue: “So, your hubcap-stamping business is in the dumps, you need 300m to re-tool your factory for selling ‘green’ accessories? OK, we’ll take the company off your back, free of charge.” So is Bofinger a Wise Man or a wise guy?
Economic conservatives might agree that anything that reduces moral hazard is a good thing. Personally, I think the Swedish banking rescue would have been the model for how to deal with the financial crisis, and that nationalization is better than Chapter 11. And way better than “here’s your money, no questions asked.”
It’s a wise move. You can’t reward incompetence with a no strings attached bailout. You broke it, and you want us to pay? Fine, but then, we bought it. It’s the only way to go.
And as for the Swedish bank rescue, an example I have mentioned on these pages before, the outcome of that 60 billion kronor (roughly 10 billion dollars) loan to the banks was that the then nationalized banks paid off their debts, with interest, in ten years time, and then the state floated the stock on the open market. A case study on how things like these should be handled.
Anything would be preferable than giving money to that greedy Redink Wagoner and his accomplices. If nationalization would work, do it. GM is pretty much toast anyway. For once I can see where Germany may have the right idea on nationalizing/socializing a company. It seems to have worked well for VW. Maybe Opel would be the same. Whatever, anything would be better than leaving detroit in charge. And if GM owes Opel money, I would say this sounds like a done deal. I wish our government was more concerned about keeping americans working rather than exporting jobs to China.
Too bad for the US. Wagoner and his band of accomplices have just pissed away an incredible amount of US net worth over the years. We will never be the country we were 20 years ago. Sad, really sad.
I happen to agree with you. But there are cultural, legal and organization difficulties that would likely make the Opel nationalization a bit more difficult.
It’s not impossible. But the German way of doing things is unique unto itself and unless GM ‘sold’ the Opel and Vauxhall divisions to the German government (the two are pretty much joined at the hip), I wouldn’t envision anything less than a long-term legal fight.
I’m still waiting for the Opel Panzer and the Opel Senator Rommel to come stateside. I’m sure that instead of a typical horn it would have a very loud German man ordering people around…
“Vatch vhere you’re going you shtupid Schweinhundt!!!”
“Vhat are you, Poland? Get out of ze vay!”
I could see the voice of John Cleese finding it’s way in there.
Of course the friendly ‘beep’ will simply be an orchestral version of Beethoven’s 9th, while Wagner’s Ride of the Valkyries would be used as the alarm system.
Come to think of it, don’t most BMW’s already do the automotive equivalent of these things?
In light of those recent news from China, they better hurry up, before Opel will be dismantled and moved to the far east.
This seems to be the right way to approach the matter. There is no way that Germany should spend any money on Opel which would then go to GM. Any politician approving such a scheme (even if accidentally) would have to resign. Since the problems of Opel are not of own making, but come from GM, it is reasonable to protect the company from going under. GM would have to agree in exchange of the government guarantees to pledge the Opel GmbH shares. When GM then does not pay back the money it owes to Opel, the state can take Opel with it. Not easy to be separated, but doable. And Forster and Demant would be a good management team for the future.
If I were in German government I would be moving full speed ahead with that plan. Team up with the UK and bring Vauxhall into the deal as well, but make sure the management is German. England has a rather spotty track record running car companies! In fact, the Australians would be wise to somehow get Holden under the new regime as well.
Germany never fell for the drop-your-pants-for-Asia “free trade” mantra which somehow gripped the US. German still makes stuff, and is a massive exporter.
Out of curiosity for people living in Germany/Europe; would Germany ever allow/was able to swallow if the Chinese wanted to buy Opel?
I believe that British would allow Vauxhall sale without any issues but I can’t imagine Opel and Germany doing the same thing.
Well, maybe finally some good will come out of this: A bidding war between the Germans and the Chinese. However, in automotive matters, the Germans have always been tight with the Chinese.
The timing of both stories appears to be too coincidental.
off topic, but there’s a great movie that nobody saw.
Sure, I vote yes, the Germans take Opel in lieu of payment and the Chinese get stuck with Vauxhall.
After all if market cap for all of GM is 1.6b, and they owe Opel 1b, even they come out way ahead in the deal.