Opel: No State Bailout Money Left
Economic coverage in Europe continues to be dominated by the plight of the euro and of the Greek government. In a way, that’s too bad, because there are plenty of other simmering problems which lose the spotlight when crises pop up elsewhere – even though that hardly means that their own situation has been resolved. One such remaining problem is the question of what to do about Opel, the European-based subsidiary of General Motors which got into trouble last year more-or-less because its parent company actually had to declare bankruptcy (on 1 June 2009) and be restructured, with a majority ownership share going to the US Government.
Reviewing my own Opel coverage on this blog, I have to confess to also being guilty of that “follow-the-spotlight” syndrome, in that my last Opel post, on September 14 of last year, came prior to the latest and most intriguing development in that saga. That happened in November, when GM decided to go back on an agreement that had been reached two months before with the German government to sell off Opel to a consortium led by the Canadian auto parts-manufacturer Magna. Yes, that deal was suddenly canceled, so it was back to the status quo ante: Opel remained a GM subsidiary and the German government could resume worrying about how much in subsidies to let GM extort against the threat of shutting down some or all the Opel plants in Germany and thereby throwing thousands out of work. (Then again, at least it had seemed back in September, before GM reneged on the deal, that the German government had found a solution to keep Opel going, and it was that timing that was the most important consideration – there was a nationwide election held in late September 2009, after all!)
But OK, these days there are new crises to watch, even as the problem of what to do with Opel remains. As a new article on the site of the newsmagazine Focus reveals (Restructuring plan starts to wobble), that problem is about to get worse. What does Opel need to survive? Simple: it needs money, and since it hasn’t been able to earn enough from auto-buyers in recent times, it needs some of that money to come from the State. Specifically, the plan was for Opel to get €1.3 billion more in subsidies from the German authorities, added to another half-billion euros from other states where Opel has plants (Belgium and the UK), to which GM was to contribute an investment of another €1.9 billion.
Except remember that Eurocrisis! The German authorities these days have quite a bit less money to work with, so that the €1.3 billion is now in doubt. Indeed, GM recently announced that it’s own results for QI 2010 were actually in the black, to the tune of $856 million, following years of losses – a paradoxical result, in that it led some German politicians to call on GM to assume full financial responsibility for the Opel restructuring. (Keep in mind that, because of the make-up of its ownership, these days GM basically = “US Government.”)
GM is sure not to be thrilled by the suggestion. Yet that money is still needed, supposedly, from wherever it can be had, to give Opel a chance to get back into the European auto market. Or can’t be had; you can expect this saga to reclaim its place in the news spotlight sooner or later.
