Treuhand Solution for GM’s German Daughter

Now that all indications are that General Motors is heading for its own bankruptcy at the end of this month, in whatever specific form, this raises the question of what is to become of that firm’s several European subsidiaries, basically Opel in Germany, Saab in Sweden, and Vauxhall in the UK. As you would expect, there is widespread coverage of this issue in the German press. Particularly interesting treatments about the latest developments in the search for a solution are from Handelsblatt (GM pressures for nationalization of Opel) and Die Zeit (USA pressures Germany towards Opel nationalization).

Note that the Die Zeit title is slightly inaccurate: it’s not really the US government, but rather the American mother company that is trying to insist that the German government take Opel off of its hands, for a nice price. The whole problem here, however, just as with GM’s American assets, is how to dispose of them once the whole concern is officially cast into bankruptcy in the near future, while actually keeping the firms operating in the meantime, i.e. still selling autos, with repair warranties that customers can have confidence in. Have no fear though, at least when it comes to Opel more than one interested party (including Fiat) has already made approaches to buy it. One could assume that that whole process might go somewhat more quickly and smoothly in Europe than in the US because of their greater separability of those assets from the rest of General Motors, stemming in the first place from geography. Still, there’s certainly not enough time to carry through a proper deal of that sort before bankruptcy happens, in two weeks’ time.

In the meantime, the German government would really not be left holding the bag with Opel, thank you very much. Instead, what it has in mind instead is a plan that Economy Minister Karl Theodor zu Guttenberg first announced last weekend, a Treuhand (“trust”) solution. In this scenario, it would not be the government but instead some (relatively) independent bank or consulting firm to which Opel shares would be assigned and whose task would be to find the best permanent buyer for them. According to both articles cited above, the leading candidates for that role are the international accounting/consulting firm PriceWaterhouseCoopers or the German publicly-run banking-group KfW (Kreditanstalt für Wiederaufbau). In fact, under this proposal whichever “trust” candidate is picked would be responsible for disposing of not only Opel, but also GM’s other European subsidiaries (i.e. Saab and Vauxhall) as well.

Even under this plan, Opel officials have made clear that their firm would require a big line of additional credit – “more than a billion euro” is what GM Europe head Carl-Peter Forster told the Frankfurther Allgemeine Zeitung – in order to remain a going concern. Much of that money is needed to get the production-lines ready to start making the new Astra model that is supposed to come out in the autumn. That money would be forthcoming either out of the KfW itself, or out of the Landesbanken (i.e. the government-sponsored banks) in those few German federal states where Opel facilities are located. Note that for the supplying of this money consideration is being given only to state-influenced banks; these days no private bank could be expected to go near any such a proposition involving the auto industry.

So zu Guttenberg has proposed this Treuhand solution, and Treuhand it is likely it will be. That may not be GM’s favorite course of action, but these days GM is playing with a very weak hand, especially in Germany where Opel has nowhere near the dominance of the national auto industry there as GM has in the US. A summit of relevant federal officials with Bundeskanzlerin Angela Merkel on this issue is to happen today. That doesn’t necessarily mean any sort of final decision, but it should move the whole process quite a bit forward.

UPDATE: This article from the German newsmagazine Focus reminds me that General Motors still has some powerful cards to play as it objects to the Treuhand solution for Opel preferred by the German government. The land Opel facilities in Germany are built upon, those facilities themselves, and all patents are in the name of GM, not Opel – and, in fact, are all now posted as collateral to various banks and to the US government. And, indeed, it seems that at that Thursday, 14 May German government “summit meeting” it was the GM representatives who were not willing to go along with the Treuhand plan.

That doesn’t mean that ways cannot be found to make it happen anyway. For that matter, as German Economy Minister zu Guttenberg also let slip in comments to the press, if nothing else can be made to work, then there would also be the option of an “orderly bankruptcy” of Opel (already the solution applied in the US to Chrysler, you’ll recall) as the means to taking things further to see whether the firm cannot be resurrected in some other form.

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