GM was supposed to have a restructuring plan for Opel in place by the end of December, but it’s looking like that deadline is DOA. In a blog post at GM Europe’s “Driving Conversations” blog, GME supremo Nick Reilly explains:
While it is indeed exciting to see that things are coming together, bear in mind this is going to be one of the largest, most complex industrial reorganisations in European manufacturing in years. It will affect thousands of people and their families; impact plants and other stakeholders.
We are determined to do this right. We must do this right. Although we had hoped to have the new business model finalised in December, it appears that more work needs to be done and further consultations will not be rushed.
I said earlier that we would have a plan in place by year-end. Now it looks like an announcement may slip into January. This is not a broken promise. It is a pledge to do something right.
More likely, the problem is cash-related. GM has thus far only offered to pay 20 percent of the cost of restructuring Opel, or about $1b of the estimated $5b price tag. The rest would come from European governments, who are not eager to see unemployment rise if Opel goes under. At least that’s the theory.
And though in some respects that seems to be a fairly safe bet (according to Sergio Marchionne, no OEM auto factory has been closed in Europe since before World War II), GM is incredibly unpopular in Europe. Speaking at a conference in Brussels, Justus Haucap, the chair of Germany’s Monopolkommission said that aid for Opel would distort competition, possibly putting automakers like VW at a disadvantage. This, despite the German government’s previous willingness to violate EU rules to fund the sale of Opel to Magna. According to Haucap, Opel’s problems started “long before the financial crisis” as the automaker’s sales have fallen by 100,000 units since 2005.
According to the WSJ, Haucap believes “It is also unclear why Opel should have no other source of funding given that it is 60% owned by the U.S. government,” and that “he is optimistic that the new German government will have a more competition-based approach to helping Opel.” In plain English: nobody wants to give GM money to keep Opel.
Germany might get what it seems to be wishing for, mothballed Opel manufacturing operations and a relatively small handful of engineers and designers left working at the Rüsselsheim design center on projects slated for production elsewhere.
How hard can it be to do an Opel business plan? The North American restructuring is a template. Call it, “Our company, your money.”
It’s called not having the protection of Bankruptcy court or the government’s active support, the money is only part of it. Do you really believe that if the government hadn’t told the UAW this is the best that you are going to be offered that they still wouldn’t be haggling in court right now (use delphi as an example). At the same time without the government’s involvment they could have closed plants and made product/manufacturing decisions that would have made more sense, just not politically friendly. With the US decision, it was get it done or die and since we’re the only ones that are going to do it, this is what were going to do (see: Germany’s funding for jobs with magna mandate). Without government involvment and bankruptcy protection it will take longer but can be done better, and since Opel is the source of your car products and 10% of a 16 million market, it would be better to get it done right.
The Opel deal was always about politics and money, not cars, technology, or global distribution networks. It fell through because there wasn’t enough taxpayer cash on the table. Put enough there, and a "buyer" will be found. That’s when the deal will get done.
The only change I can see from the first go-around is that any private interests who would "buy" Opel (in the same spin-driven sense that Fiat bought Chrysler) are now insisting on long-term government participation before they will take this turkey off GM’s hands.
Washington wants to get rid of it so that (a) when Opel fails financially or absolutely, the failure will appear to have happened elsewhere and to someone else, and (b) the Opel sinkhole won’t be around to contaminate the IPO for GM. The other players know this, and have stepped back waiting for GM to step up with US taxpayer cash to make a deal work. They believe they have Washington trapped, and they are right. The Obama administration is coming around, and is prepared to throw at least some cash in. Don’t be surprised if Washington’s good friend the Chinese government suddenly wanders by to help extricate the Democrats from the debacle of openly using US cash to save foreign jobs. (Washington will give China its money back by other means – probably something more subtle than simply guaranteeing the “loan” – so in the end it will come out of the US taxpayer’s pocket.)
The problem was not the buyer but the seller. GM changed it mind as it needs Opel to survive. The reason why Washington can’t help GM is Renault and its American daughter AMC but that leaves the question open if they can get some European countries to provide the money. Problem is those countries are the UK and Spain who aren’t exactly rolling in money at the moment
What does any of this have to do with Renault and AMC?
Renault was taken over by the French government when it hit a bad patch and then sold AMC to Chrysler out of its free will *cough*
@tparkit
I am not sure I follow. They are no longer looking to sell Opel. I can’t see anyone in the US gov’t giving GM extra money to save Opel. GM probably has enough money to fun the restructuring itself, but doesn’t want to over extend itself in restructuring when the money could be use for product development. Washington is not trapped at all in this.
My guess on what is going to happen…
GM will close plants and cuts jobs, much like Magna would have. I also think the plan is already in place, but not announced because GM is looking for gov’ts to help fund this through loans or tax breaks. The gov’ts that will step up to the plate will likely get preferential treatment, although EU regulations forbid it. The plans will be announced and there will be no official ties to the gov’ts who are providing loans to keep jobs. Just the way I see it.
“My guess on what is going to happen… GM will close plants and cuts jobs, much like Magna would have.”
Absolutely. That way, the severence payments come out of GM/US taxpayers’ pockets, and the writedowns go on to the existing company’s books. Any new owner would insist on this happening beforehand (or it being funded by special transfers). It’s just another form of taxpayer cash on the table to make the deal work. Opel is going to fail, and (as was the case with Fiat) any new owners want to make sure they come out ahead in the process.
Washington/GM is indeed trapped — that’s the whole reason they wanted a deal in the first place. Their problem is, the buyers and the European governments figured that out, and sat back to wait until Washington/GM stepped up to fund Opel’s future. In the meantime, GM is trying to make it look like keeping Opel was a “decision”, and a visionary step toward maintaining a global network to distribute GM’s brilliant new technologies and promising products. They will dump this pile of crap as soon as the US taxpayers bribe someone to take it.
The “Car-Files” – Opel conspiracies and a Fiat failure/ownership transfer that never happened?
according to Sergio Marchionne, no OEM auto factory has been closed in Europe since before World War II
I’m sure Sergio must be wrong on that one. Often these factories are turned to some other purpose to avoid large layoffs, but I can think of cases in Britain where factories closed completely. I’m struggling to think of examples in mainland Europe. Borgward perhaps?
This is not a broken promise. It is a pledge to do something right.
Ain’t that a peach. I should use that line the next time my wife complains that our house renovations are still not done.
I think the Marchionne quote was referring to German car factories not closing. Plenty of plants closed in the UK for example, Renault shut up shop in Brussels about 10 years ago for a continental European example.