So, where does DC vs. Detroit leave Opel, Vauxhall et al.? The “private intelligence agency” Stratfor [very expensive sub] summed it up most succinctly: “Add to this the complexity of Opel, a German car maker owned by GM, which Germany wants the United States to bail out but which the United States wants nothing to do with, and the fundamental problem is clear: While both Germany and the United States have a common interest in moving past the crisis, Germany and the United States have very different approaches to the problem.”
Germany’s approach: Do nothing.
Berlin is making it increasingly clear that any Opel bailout hinges on what GM will do for Opel, on what DC will do for GM, and on the existence of a solid business plan. That’s a lot of hinges.
Opel’s first business plan was torn to shreds by Berlin months ago, a new one hasn’t arrived, so Berlin doesn’t need to do anything.
DC has just torn GM’s plans to shreds, so Berlin doesn’t need to do anything.
As for help from GM for Opel, GM doesn’t know how to help itself, so Berlin doesn’t need to do anything.
Germany is ruled by a grand coalition between the center-right CDU/CSU and the center-left SPD. Germany gears up for an election in September with a very doubtful outcome. The cabinet that would have to decide on an Opel bailout is already in campaign mode. Rhetoric is high, everybody vows to save jobs, but nobody seems to be in a mood to come to a decision. The state of Hesse, home of Opel’s main plant in Russelsheim, is ruled by a freshly-installed CDU/FDP coalition. North Rhine-Westphalia, home to Opel’s plant in Bochum, is likewise in CDU/FDP hands. Thuringia, home of Opel’s plant in Eisenach, is in CDU hands. Up for election in August, with a Prime Minister who killed a woman during a freak skiing accident (he received a slap on the wrist in an Austrian court and had to pay €33K for involuntary manslaughter). In a perverse way, the center-left SPD may hope for an Opel debacle before the election. Or not—unemployment may play into the hands of the neo-communists. So again, the easiest option is to talk a lot and do nothing. If all fails, doing nothing can be blamed on a recent EU-decision that bans any unilateral GM/Opel bailout by any EU country: “Hey, we tried, but Brussels stopped us.”
The outcome of the September election could be a pro-business center-right CDU/FDP coalition, or, worst nightmare, a coalition between a weakened SPD, the Greens and the emboldened neo-communists. Paired with an economic crisis, shades of Weimar. Stakes have never been as high, so any hopes of the current coalition cabinet to act can be written off.
Meanwhile, most German manufacturers, notably Volkswagen, are busy filling the demand created by the cash4clunker Abwrackprämie. As of this typing, 379K applications have been filed. Reuters reports that 570K qualifying cars have been sold, which pretty much wipes out the target of 600K cars, and the €1.5 billion in funds earmarked for the program. Automobilwoche [sub] reports that due to the overwhelming demand, the program most likely will be extended until the end of the year. If this continues, German auto sales in 2009 will show solid growth. According to Reuters, Volkswagen is the biggest winner: 27 percent of the filed Abwrackprämien-applications are for new VW cars. Also according to Reuters, Opel benefited nicely from the Abwrackprämien-boomlet. Due to full order books, Opel’s cash may last through the summer. Even more the reason to do nothing.
As long as Opel can muddle through until the elections are over, there is no incentive for anybody to do anything. After September, the issue can be dealt with. “Consolidation” looms, and Opel may very well be the first volume producer to be consolidated. Just like an euthanized Chrysler or a severely curtailed GM would be good for Ford, an omitted Opel would provide extra breathing space for Europe’s (and especially Germany’s) automakers. Yet another reason to do nothing.
How would the US government react if Toyota USA were on the ropes while the “home team” was doing pretty much ok? Right, the USA would do nothing to save Toyota USA. Opel is up the proverbial creek, and the paddles have already been burnt for firewood. Somehow I don’t think the Germans will let the Chinese do what they did with MG-Rover though. Germany saw its industrial prizes crated up and packed off to foreign lands once before.
@John: I don’t think it’s as easy a comparison. Opel, even Ford are very much regarded as “German” companies with a long history. If Toyota USA would go under, some southern governors would worry, the rest would gloat. Opel is a national, even European issue.
However, GM has done everything to alienate Germany as far as Opel goes: Turned the formerly proud Aktiengesellschaft into a lowly GmbH, moved the European headquarters too Switzerland of all places – which always smacks of tax evasion. Recently, there were attempts of blackmail – headed off by the joint EU decision.
As for the crating and carting off to China: Germany has a rich history of selling slightly used plants to China. China’s mass motorization begun 1984 with the Santana (a plant the Germans had little use for) and was followed by many hand-me-downs until this very day. China and Germany will have a lot to talk about at the sidelines of the G20 summit. There is a EU/China summit in the works, tentatively planned for May 20th in Prague.
Does Opel really need any bailout at all? They have a strong portfolio of products a.k.a Insignia, Corsa, upcoming Astra, etc. And they have their own engineering facilities . The engines, platforms etc are really engineered in germany, so they don`t have to worry about their expertize and ability to engineer a competetive product. And they don`t have to send their platforms to aussies to overhaul them as the mothership does.opel should cut the ropes from Gm and let the sucker float on itslef, . It is simple – either you engineer yourself, or die biatch. Opel can really downsize if they have overcapacity, as long as the brain is intact.
rightly said Jurisb.
Opel have never been better, and GM should cut them loose once and for all. maybe keep a lifeline (to GM) in the form of the Insignia. but Germans can be very mean i tell you, so expect them to stay out for a while.
when other European countries implement the cash for clunkers deals, Opel/Vauxhall will even sell more. so it is promising that they might be able to ride out the storm altogether without government funding. let them just keep efficiently cutting costs without compromising their current quality and eventually they will make it out.
The German government’s firm Njet to financial aid for Opel is not just due to the imminent general election – the main reason for the government to twiddle its thumbs is the general unpopularity of throwing billions at GM’s moribund subsidiary.
On the one hand, lots of German companies are in dire straits right now, and it would be something of a challenge to justify filling Opel’s coffers while at the same time letting two dozen other companies go down the tube (some of which as large as Opel).
On the other hand, both the local politicos and the German public are worried that any money given to Opel would immediately disappear down the bottomless black hole euphemistically referred to as GM’s finances. Given how closely linked GM and GM Europe have been for decades, there is no way of supporting Opel without supporting GM at the same time – and throwing German tax Euros at the Board of Good-for-nothing Fools in Detroit is not a concept that any self-respecting politician will sell to the German public.
So, the German government will only support Opel if it’s separated fully from GM – not an easy task considering that Opel doesn’t even have the rights to its own patents anymore.
Finally, there are still quite a few people who believe that a company selling products that nobody wants should damn well go under – just like GM’s, Opel’s market share has tanked in the last 20 years, and although people do agree they’re selling highly competitive cars these days, it’s not easy to undo decades of bad decisions and (during the heyday of GM’s cutting-costs-at-all-costs craze) appalling quality.
You are leaving out a bit the motivations coming from the upcoming election. Contrary to your belief, the issue of rescuing Opel will not be left open until September, but will become a hot debate during the next months.
Yesterday, the SPD chancellor candidate Steinmeier clearly stated that he wanted Opel to be saved. The state should take a share in Opel, but also the dealers, the workers and the management. GM should remain to hold a certain share.
This position, made without any viable plan for Opel or GM, has now drawn criticism from the economics minister, von Guttenberg.
It is clear that Steinmeier wants to position himself as the saviour of the German workers and the german idol Opel. Whether in fact the German public would support his position is quite doubtful. As you correctly write, there is no plan whatsoever how to make Opel really independent. Opel is since 80 years interwoven with GM – how should a separation work, without ownership of land, plants, and patents? GM and the US government would basically need to let Opel go with ownership of such items, even without compensation!?
At least the Abwrackprämie seems to have given Opel enough maneuvering room and cash flow to survive until Summer. As it has been decided to spend an additional 1 billion Euro on this, the Abwrackprämie should normally last until end of 2009. Overall, while this payment has some really negative impacts on other parts of the economy, it has helped Opel for the time being at a cost much lower than the requested direct cash payments.
For me the development is totally unclear. I believe that without a viable concept for separating Opel and GM Europe from GM altogether, in the end there will be no money flowing to Opel. No politician who wants to survive can agree to such payments where it would be certain that the money would go directly to GM.
@tireguy: I totally agree that the Opel issue is a campaign issue – it already is. It will be, but it will remain rhetoric. My point was and remains that nobody wants to make a tough decision. Talk: Ja. Do something: Nein
Stratfor is basically a bunch of guys reading the Internet and using the Copy/Paste function to wow lazy executives.
Bottom line is Opel and Saab should be chasing VW/Audis market-share everywhere more than they are, and GMNAs decision to not make Saab competitive and Opel nonexistant in the North American market is a huge missed opportunity.
Now, with total US sales looking to remain at maybe 10M instead of 15, GMNA etal has not only domestic and foreign competition to deal with but GMEurope as well. Germany and Sweden sure dont want/need their bank accounts controlled by Detroit anymore.
The bottom line is really that when western democratic socialism gets tested, it turns out that it is really democratic selfishism. Either the elite, or the majority, will fix everything in their immmediate, percieved best interest without regard to their so-called ideology.
You are actually better off trying to deal with a New York investment banker than with one of those countries. Sucks to be an Opel worker, good luck ever getting hired again.
I thought that Opel weren’t benefiting as much as the other majors in Germany – their market share in January and February was down (with VW and Ford up). That tells me that, although they may have the product, the average German is hesitant to risk their hard-earned €uros on a company with such negative press coverage.
I don’t know how Opel or Vauxhall are doing in the rest of Europe, but I suspect that the average citizen in Spain, Italy, France and even Britain makes the same decision given that they’re getting the same media reports.
GM Europe lost money in 2008, but didn’t VW, PSA, Fiat and even Ford make a profit in Europe in the same economic conditions? Ford even has the same sales footprint, their biggest market is the UK, which is also GME’s biggest market.
Landcrusher: the NY Investment bankers nearly killed the financial system in their ruthless pursuit of bonuses. Reagonomics are dead – and let us all hope that the governments find ways to bring the economies back on track.
Dave: it is unclear how much Opel in fact is benefitting. Market Share may be down, but VW reported its best February sales since I do not know when. The direct sign that Opel has improved is that they asked in January for 3.3 bn Euro due to Cash shortage in March – now they stated they have enough cash until Summer.
Carl Peter Forster in the meantime said that Opel would have access to all GM (i.e. former Opel) patents needed, even after a separation. There may be a chance for survival here …
The bottom line is really that when western democratic socialism gets tested, it turns out that it is really democratic selfishism. Either the elite, or the majority, will fix everything in their immmediate, percieved best interest without regard to their so-called ideology.
You’re just baiting me, aren’t you?
psar,
I am not really trying to bait you, I just see this as evidence of one of my favorite points on socialism. In fact, it hides behind many isms, but its especially hypocritical in socialism, and really destroys the whole concept. The ideology seems to be very well contained behind many lines on maps, or between ethnic groups, or any other group they can seperate out.
Doesn’t the ideology call for protecting the jobs of the Opel workers? What is the difference between Opel, VW, or Renault workers? Why don’t all the socialist democracies band together to save every business in all their countries? Why do they not want to include some countries in the EU?
Could they simply be protecting their own wealth against others who have less taking it away?
Free market types seek to use the same rules for everyone, regardless of nationality or other group identity, but socialists seem to always make a distinction.
I remember a big discussion in Canada a few years back was whether they should deport someone who had been on a ship, gotten ill, been treated in a Canadian hospital, couldn’t pay, and would surely die if sent home where they could not care for him. The policy is actually to deport, but he may have gotten a break due to press exposure, I never found out.
Sort of puts the lie to the name “universal healthcare” when it’s actually more like “provincial healthcare with limitations”.
You’re just baiting me, aren’t you?
These discussions are difficult because some conservatives insist on lumping together communism, socialism, liberalism, and for that matter, any position that is somewhere to the left of Attila the Hun, into one big category. As a consequence, the nuances often got lost in the shuffle, and the end result is a tug of war over straw men.
Let’s just bottom line it — liberalism and communism are different. Really. They aren’t the same. It would make the arguments much easier if they were analogous to each other, but since they aren’t, we’ll all just have to work a bit harder to recognize the distinctions.
PCH,
Some conservatives might, but I don’t, so where is the difficulty? My post was about the western socialist democracies, and those who think the US should join them. Most so called communist countries no longer try to hide their nationalist sentiments behind rhetoric.
Landcrusher,
you have no idea whatsoever what Socialism means. We know, and we do not have it in Germany any more, thanks god. On the other hand, please be happy with your Radicalism.
Tireguy,
You still do, I am no radical. You don’t even have freedom of speech.
@Landcrusher: Would you believe it, but free speech is actually enshrined in Article 5 of the German Basic Law. The U.S. Constitution OTOH needed an amendment ….
The mostly American authors of the German Basic Law didn’t want to repeat that mistake and wrote it right in from the get-go.
As for politics, you need to get out more, widen your horizon, perhaps travel a bit …
The last “socialist” rule Germany had to suffer was under Hitler’s National-Socialist party.
Well, there was the “Sozialistische Einheitspartei Deutschlands,” the Socialist Unity Party of Germany. But they ruled communist East Germany, and failed miserably.
If you tell any Western European that he has no freedom and lives under socialism, he’ll think you need to increase your dosage of Prozac … or he’ll hit you.
I’ve lived in Germany, the U.S.A., and China. In any country, I said and wrote whatever I want, and what many people did not want to hear. I’m still here to type this.
Bertel,
I was upset about your first sentence, until I read the second. Still, we both know that there are limits on political free speech in Germany, so don’t pretend there are not. Your standard of free speech is much more limited than mine. I spend time discussing history online, and that forum has some of it’s servers mirrored in Germany. I have actually been edited at the request of the German government! (I wasn’t singled out, the subject was the battle in Normandy, and we were not talking politics at all. You do the math).
I have traveled much of the globe, Bertel (haven’t made it to Africa yet). I have lived in 2 countries outside the US. Nothing I saw changed my idealogy to the left as far as economics or civil rights goes. Quite the opposite.
I find your comment about my lack of travel condescending and ignorant. The latter is surprising given the usual quality of your posts. You might want to know that one of my several trips to Germany was for REFORGER.
Sorry if it upsets you, but the German system of government was classified as socialist democracy back in the eighties when I went to school, and I suspect it still is. Would you classify Germany, France, and the UK as the same as the US?
Lastly, your line about Prozac is absurd and telling. Of course they have freedoms, but that’s not the standard. I believe their freedoms are quite precarious, and I am not alone. The safeguards that are under attack here in the US are many of the ones they lack. They are also just the kind of openings another Hitler type needs to take power. Especially in Germany, where talking about his exploits leads to censorship.
What happens when all those that remember are gone, but the censorship remains?
Landcrusher,
In Germany we have more freedom of speech or demonstration rights as Americans believe they have. Try to find a variety of newspapers in the US which really reflect opinions from left to right – nearly non-existent. Americans get their local newspaper which reports sports and the accident at the corner.
I have lived in Georgia, and seeing that newspapers like Atlanta Constitution and Atlanta Journal are from the same company, and reporting bullshit shows where in reality freedom of thought has arrived in the US.
Try to burn a US flag in the US – freedom? Check for “political correctness” – freedom? Socialist Germany in the 80s – after Helmut Kohl took the government?