Clear-sighted auto industry analysts tell Automotive News [sub] that “Just a few months ago, GM was not in a position to retain Opel.” But now, according to these wise seers, GM doesn’t have to sweat the recovery of its embattled European division. “They were fighting on life support. Now the patient has recovered,” is the verdict. Huzzah! For lo, GM hath looked unto the hills from whence cometh its help, and it figures more just might be on its way. “I think the last year has shown that the government can be very creative when it wants to be in how it structures these deals,” says another analyst, who suggests that “private investors with possible credit support from government sources” could ride to Opels rescue on behalf of GM. After all, if anything, Opel is the bailout that got away. “There really wasn’t a view articulated (on Opel). It was one of several challenges that GM faced,” says an anonymous U.S. official “In its restructuring, there really wasn’t a particular view on a specific path.” And the door is still open for a taxpayer-backed rescue of Opel.
The WSJ reports that Opel has enough cash to keep it hanging around until the year’s end, taking pressure off the rush to find Opel a well-funded home. Accordingly, German Chancellor Angela Merkel is backing off her push for a quick sale to Magna/GAZ/SberBank. Merkel now wants resolution by GM’s September 8/9 board meeting, saying she doesn’t believe there’s a need to involve US President Barack Obama in the negotiations. “Content must come before speed,” Merkel tells Bloomberg. “Issues are still emerging that we will clear up with GM representatives thoroughly and calmly.”
Helping to take pressure off the deal is news that automakers are moving to cut supply chain ties with Magna in case the Austro-Canadian supplier does win the Opel deal. According to the WSJ, Magna promises a “firewall” between its supplier technologies and Opel, but that’s not enough to stop firms like VW from worrying. But reminding Magna of the downsides of buying a real automaker helps GM’s chances of holding onto its rogue division. But the issue of cash is still on Magna’s side, since GM has yet to secure funding for its Opel rescue.
Another challenge to GM’s European recovery is the re-emergence of a Fiat bid for Opel. La Reppublica (via the WSJ) reports that Fiat is “ready to reconsider renewing its previous bid” for Opel, in case GM doesn’t accept the Magna bid. “Given how we are totally immersed in Chrysler, we have repeated several times that our offer for Opel remains on the table. With only one condition: we cannot nor do we want to change it,” says Fiat Chairman Luca DeMontezemolo. Too bad Fiat is drowning in debt, which means that the Germans would have to financially back a less-palatable deal to avoid a Magna tie-up. Which, in theory, improves GM’s chances of coming away with its Opel intellectual property. At least it does if you look at it positively enough.
What the heck, why not p*ss away a few more taxpayer billions on GM and let them keep Opel?
Actually, the Fed will just electronically conjure up more money for the deal and send the credit card bill to “US taxpayers of the future”.
Isn’t that the hopey changey way? Sure seems like it to me.
About as much change from the prior administration as me changing my sox, and about as relevant a change.
Two sides of the same coin – are the same coin.
I think GM would be stupid to sell Opel – they are some of the best cars that they make. What they need to do is keep Opel and Holden and sell-off the money-shredding US operations! Fools!
The new term for clueless:
“there really wasn’t a particular view on a specific path”
“What the heck, why not p*ss away a few more taxpayer billions on GM and let them keep Opel?”
The federal funding of New GM explicitly included provisions that the money could not be used to prop up overseas operations.
GM could, however, transfer some funds from its profitable China joint venture to Opel, except that China might make it difficult for GM to move their cash out of the country.
It took me awhile but I think I understand “hope and change.” I am white, well educated and am in the targeted top 5% of wage-earners and taxpayers. Therefore I am deemed as inherently greedy and evil by the current administration. My patriotic duty to this nation is to “hope I have change left in my pocket” after this administration confiscates everything that I have worked hard to acquire this last 35 years of my professional career.
John Horner :
August 26th, 2009 at 3:09 pm
GM could, however, transfer some funds from its profitable China joint venture to Opel, except that China might make it difficult for GM to move their cash out of the country.
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It is very very risky. The Chinese economy is red hot now. What if it cools down? Then, GM China might become insolvent because of the cash transfer.
And then China would own the GM-SAIC operation 100% and expect to export Chinese built Park Avenue to the U.S.
Folks, I’ve tried staying current on the Opel saga, but I give up. Everybody else in Germany seems to give up also. My money is on nothing happening, and Opel will go bankrupt after the German elections.
Reuters http://www.reuters.com/article/GCA-Autos/idUSTRE57P15I20090826 has it that BILD Zeitung has it that the German government is warming up to RHJ “if it teamed up with an international partner from the car industry” (yeah, sure) but don’t hold your breath. BILD always had a thing for RHJ.
As far as China goes: GM already had pulled most profits out of China in 2008 (the myth that Chinese profits cannot be repatriated is a myth … as old hat as the Berlin wall.) There probably is nothing left to pull out.
Stratfor, for what it’s worth, already sees an ominous geopolitical angle to the sad story:
“It is also important to examine the possibility of other factors involved in GM’s treatment of Opel. Endangering the re-election of a German chancellor is not something to be taken lightly, and GM’s rejection of the Magna bid could certainly embarrass Merkel and her ability to engage in international politics. But the U.S. government — the majority shareholder in GM after its bankruptcy — is not inclined to help, and certainly not after Berlin snubbed Washington’s request to send more troops to Afghanistan. One of U.S. President Barack Obama’s platforms during his presidential campaign was his ability to mobilize European support for the U.S. military effort in Afghanistan. This was his main foreign policy pillar and a key distinction from former U.S. President George W. Bush. However, the Europeans — with Germany at the helm — have been wholly uncooperative. This does not mean that Obama is actively trying to sabotage Merkel, but he certainly sees no reason to offer a helping hand.
Furthermore, the United States cannot be happy with the recent trend in German-Russian relations, which seem to be growing warmer — too warm for Washington’s liking. With Russian banking and manufacturing sectors playing a key role in the Magna bid, the United States may also be sending a message to Germany that it is displeased with the growing influence of Russian interests in the German economy.”
GM-Opel-Afghanistan – a reach? Maybe, maybe not. The political effect in Germany is overstated. EVERYBODY (except VW, who wants Opel dead) wants Magna. The unions, the SPD, the CDU, everybody. If the Magna deal falls through, it will have zero impact on the elections: The ugly Americans will get blamed, life will go on. Opel is no item in the pre-election debate. The debate is focused on important issues such as who goes where in their government cars, or whether a minister hires a ghostwriter for writing a law. Opel is off the radar.
Bertel, what’s your take on Fiat having another kick of the tyres?
HPE: Fiat said they are still interested, but “under the old conditions.” The old conditions were no money down. They don’t have any. Maybe the Germany were leading up to Fiat when they mentioned RHJ and “an international partner from the car industry” (if its true ….) I don’t think it’s going to happen.
Bertel – thanks as ever for your lucid comments and also for the admission of a struggle to keep track of the twists and turns in this sad story. I’ve been having a terrible time to make sense of it.
It seems that many big German companies are waiting for the day after the elections, to announce big job cuts (without jeopardizing a CDU election victory). I can see GM finding some way to get a wodge of cash to do something with Opel. I suspect they may try and drive a wedge between German, Spanish, UK and Belgian governments, trading off job security.
I wouldn’t expect US management to care too much about the underlying principles of the European single market. GM will get to retain their small-medium car platform development expertise in Russelsheim, a bunch of German blue collar people will be left to find another job, the whole of Europe will be at each other’s throats over unfair competition between nation states. And Russia will fall back on Energy Terrorism in a desperate bid to increase oil prices/ wealth extraction from W.Europe. So what’s to get anxious about?!