The board of GM convened on Friday to finally decide Opel’s fate. The board did as expected: It did nothing. They left everybody hanging. The board decided to not decide anything.
According to Reuters, the GM board desperately needs critical information from the German government. To wit: What state financing would be available if GM would sell Opel to their darling RHJ International, and not to Magna, which is favored by Germany.
Excuse us?
Do we have a serious case of highly contagious ADD, which has befallen the complete GM board? We thought it had been made perfectly clear:
If the buyer is Magna, Berlin will shell out €4.5B—for starters. Berlin will do this on its own and they would even abstain from begging other Opel countries for money in the interest of getting the show on the road.
If the buyer is RHJ, RHJ will get nada, zilch, zip, nichts. Verstehst?
Apparently not.
Today, Germany’s Economy Minister Karl-Theodor zu Guttenberg said to the Hamburger Abendblatt: “I regret that the supervisory board was unable to come to a decision.” But there is “still room for an agreement.”
When politicians say that, that room usually gets desperately small.
As far as additional information goes, the ADD-afflicted board would be well advised not to ask again. “The federal government and the states have provided GM with all the information which they believe is needed for a decision,” an exasperated Guttenberg told the newspaper.
Guttenberg hopes that GM makes “a smart decision.”
Why do we doubt they will?
Failure to accept reality is common enough… Failure to accept reality when asking for billions of dollars is madness. One can only assume that GM is completely screwed if Opel goes to Magna.
No real need for GM to do anything. They now have a 40 day process for a relatively painless bankruptcy.
Top leadership didn’t even get fired.. They got to “retire”…
Their best bet is to do nothing, wait for the economy to tank even further (coming to a town near you right in Nov. / Dec if I’m right), blame the “global economic downturn” and wait for the next check from Uncle Sugar.
Change is hard.. waiting for a check is much less stressful.
Well, there is an obvious dilemma. Whether GM sells Opel to Magna or RHJ, in both cases, GM would keep a minority share.
However, Magna wants to become a player in the big league, building their own cars and so GM would lose all control. Which means that they couldn’t just go in and take some Opel technology and they certainly couldn’t buy back Opel later on. They would lose the European market entirely and they would lose the Opel know-how. And Magna has pointed out that their focus is especially on Russia, a growing market where GM would surely love to play a bigger role and where they don’t want another competitor in the form of an independent Opel, a company that after all should belong to GM anyway (in their view). Not to mention what would happen should Magna decide to enter the North American market.
RHJ on the other hand doesn’t care about building cars. Under their rule, GM would certainly still be de facto owners of Opel. RHJ is in it for the money, so they won’t have any problem with a buy back clause either, given that the price is right. RHJ would cut costs, shrink Opel, fire excess employees, close down plants and then sell Opel back with a profit.
The problem is, that the German government doesn’t want the second scenario to happen. GM would like the German taxpayer to pay for all the measures that are necessary to shrink Opel, which certainly isn’t in the interest of the German politicians. GM is basically asking for a free lunch (and why not, it worked in the US after all).
So now they have the problem, that they would like RHJ to get Opel, but it would cost them €4.5 billion…on the other hand, selling to Magna would mean to sell their most important development center, which would also have long term costs, albeit they’re hard to quantify.
There is a third option of course, which is letting Opel go bankrupt, but this will hardly turn out any better for GM than each of the other two scenarios. GM is between a rock and a hard place and thanks to decades of executive experience, they’re incapable of making a decision.
There’s one thing I don’t get though…doesn’t the German government already have control over Opel via the “Opel Trust” which controls 65% of Opel after the German government already gave €1.5 billion in loan guarantees…? Or is the Opel Trust still under GM control and was simply created as a collateral for the German government loans? In that case, Opel going bankrupt would mean that the German government would get those 65% and could them just hand on to Magna…
See, I’m finding this all passes my understanding anyway.
ChristyGarwood of GM answered my question about who owns GM Canada – new GM does.
But:
“GM-Europe became Adam Opel before the US BK filing and includes Vauxhall, so it is neither old nor new GM, but new GM is doing the negotiation for its sale.”
GM, old or new has nothing to do with Adam Opel, but they are negotiating for its sale. Wazzat?
Bertil, maybe you could throw a wrench in the works by starting negotiations with Guttenburg of the German federal government. Seems to me you have as much right as new GM or old GM or Dave, the Handy Dandy Man, to negotiate. Maybe TTAC should.
What a shambles.
“Verstehst?”
Nein. Sprechen Sie bitte langsam….
Ford Motor Company bought many auto companies over the past years, some for expanding their overall share of the market, several for their patents and processes. Those that were viewed in the light of having having innovative technology useful to Ford were purchased well knowing that someday they would be sold off and so from day one after their purchase Ford did everything right to secure those innovative aspects for themselves and no one else.
General Motors being the folks who believe they run the automotive world, never thought about a day when they might have to sell the auto companies they purchased, never set themselves up to hold the innovative aspects and ideas they bought and now having heavily relied on Opel are now met with the consequences of having much of their stockpile of future ideas taken away with the sale of Opel.
Bad management just gets worse.
@wmba:
GM, old or new has nothing to do with Adam Opel, but they are negotiating for its sale. Wazzat?
There’s nothing hard to understand about it; it’s just another chapter in the fiction of which corporations are made. It’s the usual bullѕhit shell game. Hey-hey-hey, five’ll getchya ten, follow da queen-follow da queen-follow da queen-yaknowwhatimean? Yeah, “New GM” is totally different from “Old GM”. Not the same at all. Wholly different company. Got it? *stage wink*
Nice to see The Onion get some pub!
This is a pretty straight up issue. GM has no issue with Magna.(However VW does) Its Szberbank (sic) they have an issue with. GM does not want to turn over Opel’s and GM’s technology to the Soviets. Its that simple in a nutshell. The german government on the other hand wants to make nicey nicey with the Soviets for Natural Gas. This is the crux of the situation.
Once Opel is sold to Magna/Sberbank they will never see it or the IP again. They will have nothing to sell in Western European markets other than Chevy badged Daewoos. They are sawing off a limb and just won’t be competitive in Europe.
The German govt. is intervening to protect German jobs and the industrial base, they don’t need to “make nicey nicey with the soviets for Natural Gas” the Russians don’t have another market for their gas.
@Bubba Gump: By the way, the “Soviet” thing ended 20 years ago. Also, and this may come as a shock to you, the Berlin wall has come down!
Europe is the only market that buys Russian gas for world market prices, so Russians are definitely not interested in killing the golden goose… No appeasement needed.
Thanks for providing the needed “Soviet” clarification Vega. Move on people.
Torn – isn’t there a 4th Scenario which we haven’t properly understood yet. Although Opel was shifted out of old-GM into a trust (made up of GM Europe and German government trustees), the company is still up for sale.
Germany wants Magna (scenario 1), new-GM want RHJ and a nice buy-back clause (scenario 2), neither are willing to compromise. Scenario 3 is just let the bridging-loan money for Opel run out to they go into bankruptcy (scenario 3).
So what about the possibility that Adam Opel is moved out of the trust and back into full control by new-GM? That GM pick up the operational funding again and Opel remains an integral part of the bright, shiny new world that is “New (and improved) GM”?!
I know the German workers really don’t want to work for the Americans again and have lobbied hard to ensure that the Federal States support this position. But given an unwillingness to compromise on 1 and 2, and the fact that EVERYBODY loses under scenario 3, is this 4th option so unlikely/ legally impractical? Are there any informed opinions about this? Thanks.
Maybe there’s a 5th option after all. Allow Opel to go bankrupt then sell it as a sum-of-the-parts arrangement to raise cash. Would proceeds end up in new GM coffers? Would GM take the risk of their IP effectively being up for auction to the highest bidder? I doubt it.