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Category: Germany
That was quick. GM is saying nein, danke to SolarWorld’s offer to buy elements of its Opel subsidiary for one billion Euros. “This is pure speculation. Opel is not for sale,” GM Europe spokesman Nelson Silveira tells Automotive News [sub]. Meanwhile Opel is slashing production, and angling for its own federal bailout, courtesy of Berlin. Of course a German bailout of Opel will only happen if GM files for bankruptcy, but then, the same could be said for SolarWorld’s offer. AN notes that SolarWorld “benefited enormously from new energy laws set up by the Social Democrat-Greens government after it took power in 1998,” and it’s clearly aiming to not only acquire Opel up for a song, but to turn around and snag the government money as well. This is what the new economy calls “timing the market and the government,” a technique the firm is clearly riding to success with solar panels. Anyway, auto industry boffins say the offer is a joke, a charge SolarWorld founder and CEO Frank Asbeck firmly denies. Meanwhile, GM is clearly less adept at “timing the government,” or at the very least “charming the government.” With a US bailout looking increasingly less likely, GM may soon lose the luxury of saying no to offers like this one.
AFP is reporting (via Yahoo News) that German Solar Power firm SolarWorld has offered to buy Opel for 1b Euros, in hopes of creating Europe’s “first green automotive group.” The offer consists of 250 million euros in cash and 750 million euros in bank credit facilities for Opel’s four auto factories and a key research centre in Ruesselsheim, western Germany. I know, I know, you’re probably asking yourself if this is some kind of twisted joke. “I could not be more serious,” says SolarWorld boss Frank Asbeck. “We would not make this offer otherwise.” Of course there are still strings attached. For example, SolarWorld wants a liquidity guarantee for Opel from the German government. The deal also would require a complete split of Opel from GM, and compensation payments of 40,000 euros per Opel worker, which would approximately equal the one billion euro purchase price. But, as Global Insight analyst Christopher Stuermer points out, “Adam Opel Germany has total assets of around eight billion euros — SolarWorld’s offer is ridiculous.” The consensus appears to be that this will only happen if GM goes under, in which case the German state of Hesse has already pledged 500m Euros. After watching several hours of House Financial Services Committee hearings, this blogger is as convinced as ever that this is an outcome worth betting on.
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?
While managers and union leaders of Opel and GM-Europe had a crisis summit with German Chancellor Angela Merkel and her ministers at the Kanzleramt, the drumbeat of “disentanglement” of Opel from GM picked up a steady rhythm. On Saturday, it was just whispers being picked up by TTAC from German contacts. On Sunday, it was press reports that openly discussed to jettison the Opel lifeboat from the sinking mothership. Today, everybody says it was their idea. Even Opel managers, who were just privately grumbling before, are outing themselves: “Managers at Opel would ideally like to see the unit spun-off from GM, a move which would decisively disentangle the company from the financial and political dramas unfolding in Detroit,” writes Germany’s news magazine Der Spiegel. “German politicians and union leaders like Armin Schild also support the idea. Schild declared on Monday that GM must “let Opel go free.” Free, but where, and how?
A few days ago, GM CEO “Red Ink” Rick Wagoner told his man in Germany to ask the German government for €40b (and sundry other goodies.) Opel-Chief Hans H. Demant’s request was shot down in Berlin faster than a 747 over Kamchatka. In fact, Opel/GM’s mental sanity was publicly called into question. Deeply humbled, Demant has penned another letter to Berlin. We paraphrase in the spirit of brevity: “Dear Angela: I’m sorry I rubbed you the wrong way. Can you maybe spare €500m? No? How about €200m? Please! I’ll pay you back. Real soon, honest. Ever your humble servant (and master of 25700 jobs), I remain respectfully yours, Hans H. Demant.” You think we are kidding? Here’s the real rub-a-dub-dub:
Yesterday, we reported that the European Commission threatened to drag Germany in front of the European High Court again– if Germany dares to pass a revamped Volkswagen Gesetz (VW Law.) Yesterday evening, the German parliament flipped a whole aviary worth of birds in the direction of Brussels, and passed the face-lifted law with an overwhelming majority. Result for the time being: VeeDub’s soon majority-owner Porsche will have to kowtow to the state of Lower Saxony, owner of a paltry 20.1 percent of the shares. Porsche must ask for their OK on major issues. On one issue, Porsche doesn’t even need to ask. Lower Saxony will say “nein, nein, nein” to Porsche booking VW’s profits as theirs. Und now European Trade Commissar Charlie McCreevy will file papers “before Christmas,” and the contemptuous Bundesrepublik Deutschland will face the judges of the European High Court. Again. The court will rule (anybody guess how?) Germany will have to implement the wishes of the court again (anybody guess whether they will?) The never-ending saga continues. In the meantime…
Germany’s industry rag Automobilwoche [sub] is running an interesting ballot. “Who do you think would profit the most if GM goes bust?” (or German words to that effect). The options are kind of odd. Only Ford, Renault/Nissan, Toyota, and Volkswagen are eligible. But keep in mind, Automobilwoche is a German rag. They could have asked “What if Opel would die?” But they didn’t. Do they know more than we do? 846 souls have voted so far.
A few days ago, Porsche’s Wendelin Wiedeking sent a letter to Germany’s parliamentarians, urging them to say “Nein” to Chancellor Angela Merkel. According to Braunschweiger Zeitung [via Automobilwoche sub], Wendy was not what you’d call enamored with a new version of the “Volkswagen Gesetz” (VW law). That’s the legal power bestowed upon The State of Lower Saxony to control VeeDub— despite the State’s [now] relatively measley 20.1 percent holding. Last year, the European Court struck down the law– in the interest of free trade, Mutter and Apfelkuchen. The ruling opened the door for Porsche to ride to the rescue of VW, supposedly shielding VW from gang-rape at the hands of Kirk Kerkorian, Cerberus and a RICO of takeover-artists. And yet Berlin has no plans at all to scuttle the Volkswagen Gesetz. Porsche can own as much of VW as they want. With the law on the books, Porsche can’t fight the power from Hannover or Berlin.
“Gotta ask for the bail – I mean sale, ha-ha,” Red-Ink Rick Wagoner told his man in Germany. That would be Hans H. Demant, VP Developent of GM Europe and Managing Director of Opel Germany. Wagoner instructed Demant to ask the German government for €40b, or make that a cool $50b. “What should happen, Hans? The worst thing Angela can say is no.” Demant didn’t want to go eye-to-eye with Chancellor Angela Merkel. Instead, he wrote a letter, to be co-signed by Klaus Franz, the head of Opel’s Workers Council. Usually, Demant avoids signing any paper that has Franz’s signature on it, but the situation was dire, and the message to be sent was “jobs, jobs, jobs.” In the letter, GM Germany’s unlikely duo applied for loan via the European Investment Bank, as soft as marshmallows. While they were at it, they also suggested cheap credit to buy new Opels cars, and cash into the hand of each upstanding German citizen who feeds his Opel car older than 10 years into the shredder, along with a tax credit to reward the purchase of a new car. “That should do it” said Demant. Both signed, and the urgent enquiry for Euros was expressed to Berlin.
No good deed, or lucky bet, goes unpunished. Germany’s auto makers are crying poor at the bargaining table at the same time Porsche-VW is crowing about record gambling profits. Against this background, the AP reports that “IG Metall is seeking an 8 percent raise for the 3.6 million workers it represents in the metal and electronic industries.” Germany’s auto industry has the lion’s share of IG Metall workers. Didn’t the union bosses in Sindelfingen get the word about Automotive Armageddon? Apparently the union guys have taken a page from the Gospel of CEO’s and can only see the massive profits German industry has run up in recent years. “IG Metall has defended its requested wage hike as justified because companies’ profits increased 220 percent between 2004-2007– a time when wages effectively increased by only 8.7 percent– union leader Berthold Huber has also indicated they would accept less.” Ah, the dirty little secret of modern times has been, up until a few months ago, the massive run-up in corporate profits and executive pay happened while workers got next to zero share of the growing pie. When times were good, the excuse for giving little was global competition. When times are bad, the excuse is “can’t afford it.” Meanwhile, the burghermeisters continue to live large and the pain of recession falls on the masses. Tune in tomorrow for more of the same.
The financing arms of Germany’s automakers are way ahead of GMAC. Germany’s industry rag Autohaus heard of a little sit-down of BMW, Daimler and VW. All present cheerfully agreed to ask Frau Merkel for a little help. Not to prop up their equity, no need. They’ve got enough. BMW actually went on record and said: “Our bank is right as rain.” (Or German words to that effect.) So why are they holding out their hands for a hand-out to the tune of a few billion Euros? Germany’s captives would like the government to co-sign their notes, which would give them access to cheaper money, which would make their profits even higher, which would give their parents more leeway in giving low interest loans for even higher sales, which would be good for the economy, jobs, the social structure of Deutschland. Dietmar Kupisch, spokesman of VeeDub Germany’s Financial Services said it simpler to the Braunschweiger Zeitung: “It would mean cheaper liquidity for us.” Mercedes doesn’t need any help. Surprising reaction from Opel: “Thanks, but no thanks. We are taken care of by GMAC.” Haven’t they gotten the memo? Nobody even bothered to ask Porsche. Anyway…
Hedge fund fornicator Luxury car maker Porsche has just announced their numbers for their last 2007/2008 fiscal. You guessed it: while the rest of the world is retching in the WC, Porsche’s profits are up a pornographic 52 percent. “The Stuttgart-based maker of the ass-engined sports car 911, IMS- challenged Boxster/Cayman and Cayenne SUV reported a net profit of nearly 6.4b Euros ($8.2b) for the year that ended July 31. That’s compared to the 4.2b Euros Porsche earned in the 2006-2007 year,” tickers The Associated Press to the world’s flabbergasted financial editors. The numbers are so mind-blowing that there are different accounts of the accounting data. The Wall Street Journal has on its wire that Porsche’s profits “soared 46% to €8.57 billion Euros, or about $10.9 billion.” (The €8.57b number is repeated by Deutsche Welle, the €6.4b figure is popular with Bloomberg. We’ll see. A few billion more or less don’t matter, we guess. Mum’s the word on Porsche’s Investors Relations page. We’ll probably have to wait until Monday, after they are done partying. Meanwhile…
Who says the little guy can’t profit from Porsche’s mucking-around with the Volkswagen stock? Jochem Heizmann, a lowly member of Volkswagen AG’s BOD and head of Group Production (which doesn’t mean he’s in charge of producing rock groups) just sold a measly 2000 shares of VeeDub stock for a paltry €537.93 a piece, clearing a trifling $1.39m, Automotive News Europe [sub] says. They unearthed this inconvenient truth after reading the disclosure statements which are now obligatory even in Germany. Previously, Dr. Prof. Heizmann (we are at Volkswagen, after all, which must have more professors than MIT) worked at Audi. He ran VeeDub’s plant in Zwickau, then was responsible for production at Audi again. Just your average engineer. If a guy like him can clear a mil in a few days, anyone can. Or not.
Goldman Sachs is preparing the public for horrific news: a possible loss in the fourth quarter. At least that’s what Merrill Lynch analyst Guy Moszkowski told Reuters. Since Goldman Sachs went public, they’ve never had a loss. Merrill’s Guy fingered the usual suspects: “large corporate private-equity portfolio, equity proprietary trading business and exposure to Chinese equities.” Yadda yadda yadda. Bloomberg said that “a Goldman Sachs Group Inc. fund has lost $990 million since it started in January.” Wall Street has been abuzz with speculation that Goldman Sachs and Morgan Stanley may have a large exposure to the Porsche/Volkswagen machinations. Last Wednesday, Morgan Stanley fell as much as 26 percent in New York trading; rival Goldman Sachs dropped as much as 11 percent “amid speculation a surge in Volkswagen AG shares may have saddled some banks with losses” as Bloomberg put it. When that hit the wire, CNBC called the usual “unidentified Goldman employees with knowledge of the situation,” and they said it’s all wrong: “No significant losses tied to Volkswagen.” Yeah right…
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