I almost missed it, but here is the article I had been waiting for about the big question now confronting the German government. With Opel allegedly only having about a month’s worth of cash left – should it stay or should it go? We have recently touched upon this affair here, although that previous treatment was shaped around the emergence of an Opel fan club whose members certainly see both a notable past as well as a promising future as perfectly good reasons for the German State to intervene to help see the car company through.
Wolfgang Münchau, of both the Financial Times and Financial Times Deutschland, although evidently German himself, clearly does not class himself among that group of Opel fans. His commentary piece is cheerily entitled Have a good trip into bankruptcy!, and he begins it with the generic tale of what has happened to him at many a rent-a-car stand in Germany: sorry, the friendly lady behind the counter informs him, but we’re all out of our VW, Mercedes, and BMW models for you to choose from, how about that Opel there in the corner? Münchau says that, at such times, he is always sorely tempted to simply rent a bicycle instead.
OK, so it’s evident from the start that Opel can expect no favors from this particular FT/FTD columnist. Unfortunately, the analysis that ensues about why the German government should just stay hands-off and let the firm go meet its demise is precise and mostly incontrovertible. Opel does not embody any sort of key technology that would need to be preserved by keeping the firm alive. (Actually, although Münchau does not bring it up, even if Opel did possess some snazzy proprietal technology, it would inevitably be owned by the parent company, GM. More on this below.) And its closing would not overwhelmingly hit any particular region or industrial sector, he writes. (I have my doubts about the former; Rüsselsheim, a German city in Hesse near Frankfurt and the Rhein and Main rivers where the main Opel factory-complex is housed, would become quite a forlorn place if Opel were to shut its doors.)
Actually, Münchau’s strongest argument is a pure economic one: everybody knows that the auto industry in Europe (and indeed on a worldwide basis) has long been suffering from overcapacity, so it’s time to start cutting down on that capacity to manufacture automobiles, starting at Rüsselsheim. Frankly, he adds, although that is a start, it will hardly be enough to solve the problem; quite likely some French and Italian firms are going to need to die as well, and the survivors would do well to advance the pan-European ideal and form cross-border companies to carry on. If you want to see VW and, say, Peugeot as stronger companies, he writes, then you just have to let Opel go. (On this point see my previous entry on how state aid to one company inevitably means unfair conditions of competition for the other firms in that industr.) If you save it, then there will soon be another company in line for a government rescue, and then another, etc. Münchau sets up a neat analogy with the Bear Stearns/Lehman Bros. experience: the first one was saved, but by the time Lehman Bros. came up next the US Government – wondering “And who will be next after this?” – was starting to doubt whether it could really save the whole financial sector, so it let Lehman fail. Similarly, better simply to let Opel die, especially given its smallish market-share (around 9%), lack of distinctive, proprietal technology and (alleged) lack of concentration in any particular area of the country.
Really, though, I would imagine that anyone looking at the Opel situation should be able to figure out fairly quickly that the firm is a goner if only because of its special circumstances, namely its being wholly-owned by the American auto behemoth, General Motors. This brings at least two special considerations into play, concerning ownership and timing. The German government is understandably very suspicious about giving any financial aid to Opel because of suspicions that most or all of it will sooner or later make its away across the Atlantic to actually benefit the American company instead. (This is where we also tuck the remark from above that, even if Opel were special in some way that might make it worth saving, anything that made it special would inevitably be the property of the Americans.) Even if Chancellor Merkel had no hang-ups about this, there would still be the timing issue: It would seem (from GM announcements about how little cash its German subsidiary has left) that the Opel situation needes to be decided first, before President Obama decides for his part whether to do anything further to save GM. Yet any assistance to Opel is utterly wasted unless there is parallel financial help of some kind from the American government to GM, something that cannot be guaranteed (and, indeed, from news reports lately seems to have become more unlikely). So, unless the American and German governments can make mutual promises, the only logical thing to do in this game of bluff-poker is to throw in one’s hand and fold, i.e. let Opel go.
One final side-note: Münchau apparently wrote this piece only in German for the FTD, since no English translation is currently listed on his FT columnist’s page. So it seems he lives quite an impressive double-life, writing in English for the FT (one wonders how much assistance he needs there from editors and such) and in German for the FTD – and never the twain shall meet! But that’s why I almost missed this piece, since the regular roster of econo-blogs that I consult would have pointed it out to me if it had been available in English. But then I wouldn’t really have been supposed to discuss it, under the terms set by this weblog’s sub-title (“. . . non-English-language press”). We do violate those terms, but at the same time like to keep such violations to a minimum here.