What is to become of General Motors’ European subsidiary? The European auto-market is overcrowded with suppliers, that’s clear; Opel needs a guarantee of money, from someone, in order to stay on its feet financially and be able to compete. Yet the source from which the company thought it could gain the guarantee it needed – the German government – has been growing cool to the idea in light of the many new demands on its money from elsewhere (e.g. Greece). Long-time readers will know that I’ve been covering Opel’s recent travails more-or-less consistently; you can update yourself on the situation from my last blogpost on the subject here.

But now firm decisions are finally being made in this matter by the German authorities – or at least are seeming to be made. For those interested, and with the required German language skills, the ongoing saga can even be followed fairly closely on the @Deutschland_ Twitter-feed. I know: it’s that sort of thing that you are glad to leave for me to do instead, and I’m pleased to oblige. (One caveat: @Deutschland_ only follows material from the German newsmagazine Der Spiegel.) But for now, let’s go “over the jump” to this blogpost’s full article, since a couple of tweets from that @Deutschland_ feed need to make an appearance. (more…)

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!) (more…)

What’s going on with the Swedish automobile manufacturer Saab (owned by General Motors since 1989)? Is it to die, or not? Not even the correspondent for the esteemed German business newspaper Handelsblatt, Harold Steuer, can quite figure out what is going on, but he does give that his best try (The tangled game around Saab continues).

If you haven’t been keeping track, Saab is supposedly in line to die because GM is ready to pull the plug and shut it down: the mother company announced last Friday that it was ready to begin Saab’s “orderly wind-down” and named some liquidaton-partners it expects to hire to help with that. But not so fast: cars are still being produced at the plant in Trollhättan! They are new models, even! What is more, a take-over offer from the Dutch sports car-maker Spyker (actually, that company’s third such offer) was put forward last Friday. There is a similar offer outstanding from a consortium of the investment company Genii Capital (based in Luxembourg) and Formula 1 head Bernie Ecclestone, and also one from yet another consortium that includes former Swedish politician Jan Nygren and the former head of the German truck-maker MAN, Håkan Samuelsson. And GM has made it clear that it is still open to considering all such offers.

The union representing Saab workers are furious at the resulting uncertainty about the company’s future, calling the company’s behavior “inconsistent and shocking.” And then there’s a further rumor Steuer reports of Saab moving a factory to China to produce there the new 9-5 model and/or Buicks directly on behalf of General Motors.

What to believe, if anything? Steuer makes the sensible observation that the best thing to believe is the fact-on-the-ground, namely that a new model (namely that “9-5” – maybe there even are plans to hire Dolly Parton as advertising spokeswoman?) is now starting production. So GM probably does not in fact plan to allow the company to shut down entirely just yet.

Rolf Benders has a interesting article today in the German business newspaper Handelsblatt (“Wall Street’s old rules”) that points out something important which nonetheless few of us (including certainly myself) have realized: this “Great Recession” that kicked off in 2007 has wreaked pure havoc on the Dow Jones Industrial Average.

That is of course the mostly widely-watched stock exchange index, which additionally serves as the basis of numerous index funds as well as derivatives traded on the Chicago exchanges. But lately, as Benders points out, it has been all messed up. Those that determine the make-up of the elite 30 companies that make up the Dow don’t like to change that very often; there have been only 27 changes since 1976, and no changes made at all in the periods Nov. 1999 – Apr. 2004 and Nov. 2005 – Feb. 2008. But such stability also can be bad: it’s only recently that GM, AIG, and Citigroup were removed from the Index, i.e. long after it was clear in all three cases that catastrophic misfortune (to give a charitable interpretation) together with substantial government intervention were making any objective valuation of their outstanding stock’s value impossible. GM had been part of the Dow since 1923; now the only company left of the original 12 (from the beginning in 1896) is General Electric, which itself is not doing so well these days either. (The three kicked-out were replaced by Kraft Foods, Cisco, and Travellers Corp.)

The Index is too volatile; it’s not volatile enough; but forget all that, boiled down to its essence Benders’ complaint against the Dow is simply that it is composed according to the decisions of the editor-in-chief of the Wall Street Journal. Here he has his own agenda, which is precisely to talk down the Dow and so talk up the DAX (or Deutscher Aktien IndeX, essentially the “Dow” or blue-chip index for the Frankfurt Stock Exchange). It’s true that the latter has had its composition changed 29 times already since it was created in 1988, so Benders is willing to call it “shameless” (schnöde) – but it’s at least also put together in a transparent way,* unlike the Dow which remains subject to the opaque and arbitrary whims of one particular editor.

Anyone in the know about the American securities markets has long known anyway that the Dow Jones Industrial Average inevitably gives a distorted picture of the state of the securities markets there. But Benders is living in his own fantasy-land – the one clearly marked “Off limits!” for serious business reporters of all stripes, German or otherwise – if he really believes that the DAX will take over the Dow’s place anytime soon as a closely-watched indicator. This issue transcends mere questions of the validity of one index’s composition versus another’s, in favor of larger issues like the world-wide impact of one country’s securities markets versus another’s. Ground-shifting changes along those lines in the future can certainly not be ruled out – no more than anyone should bet that the US dollar will remain the world’s reserve currency forever – but minor objections over one index’s “transparentness” versus that of some other index will hardly be the way that we all get there.

* Benders doesn’t specify in his article how the DAX is “more transparent,” but the claim is probably valid since it is automatically calculated from the current share-prices of whichever happen to be the 30 largest German companies in terms of order book volume and market capitalization.

If you’ve been following the news out of the US recession at all, you’ll be aware of how General Motors recently beat all the experts’ expectations by successfully reorganizing under American bankruptcy laws (“section 363” and twenty-three skidoo!) within the actual forty days that the company and the Obama administration claimed was all that was needed. But according to Matthias Ruch, New York correspondent for the Financial Times Deutschland (GM, the little giant), it’s all going to be uphill from here on out. From his lede: “Opel’s mother-company is now celebrating her own rebirth. But this new beginning is more form than substance [German: mehr Schein als Sein]: the former auto-giant is just blundering on aimlessly.”

That rapid reorganization was indeed an impressive achievement, though it necessarily had to be accomplished in broad, slashing strokes: $40 billion in debts were canceled outright, and the former auto-making colossus was split into a “good” and a “bad” company, the latter (now with the catchy monniker Motors Liquidation Company, if you’re in the market for some cheap assembly-line equipment) now little more than a pile (better in German: a Schrotthalde) of discontinued brands and factories. But Ruch lets us know that the new company still retains financial “obligations” in the double-figure $ billions range. (more…)

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). (more…)

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.) (more…)

I’ve had this editorial in the Frankfurter Rundschau by Mario Müller (title: “Every man for himself”) held off to the side for a couple days until I could find the chance to address it adequately, because it reminds us of a simple but bald fact that we would all do well to remember: state aid to help the auto industry survive, or even an individual auto company, is precisely protectionism, plain and simple. So many of the heads of government circulating around the world today piously declaring “Protectionism! No indeed, we can’t allow that,” if they nonetheless are willing to extend financial support to their countries’ auto interests, are simply the usual sort of political hypocrite that we have all come to know rather too well.

Given that such pronouncements were apparently the main output coming out of the otherwise disappointing special EU summit last Sunday over the economic crisis, we probably need to include under that “hypocrite” rubric President Sarkozy of France. Chancellor Merkel of Germany potentially belongs there, too, depending on what she decides to do about Opel in particular, and decision time is coming very soon now that GM has indicated that that division will run out of money in a month. It probably would also include the leaders of some other EU members who themselves have more recently built up a thriving auto sector – like the Czech Republic and Slovakia – except that those governments simply don’t have the money to spend on any such thing. And sad to say, it could also include Barack Obama – again, depending on what he decides to do about the new requests for mega-money from GM and Chrysler.

They don’t like being hypocrites, of course, but from Obama on down the political impulse to supply some assistance to your national auto manufacturers is usually pretty overwhelming. So let’s follow along with Müller why that’s really not the thing to do. As he points out, blatant and ham-handed instruments of protection, like tariffs assessed at the incoming port or airport, while still prevalent, are no longer so much in vogue. Instead, governments (yes, even those within the EU, where it is supposed to be a completely open market) pursue their protectionism in more subtle ways, such as giving native companies certain tax breaks, or awarding subsidies – which is precisely the aid that the auto-makers from the US to France to Germany are asking for. Quite simply, this provides native firms with an unnatural advantage, enabling them to sell their wares for less and/or to gain a greater profit by doing so even though they probably are not the most-efficient producer. Meanwhile, of course, it’s the taxpayer who is paying for this dubious privilege of shifting production to a less-efficient producer.

Again, all of this will likely butter no parsnips when it comes to the political decisions whether to accede to the auto firms’ calls for help, as economically-distorting as such subsidies can be shown to be. It’s at least refreshing to be able to get such a public reminder of the point in the (on-line) pages of a major newspaper in a country whose economy is dominated by the auto industry to an even greater extent than it is in the US.

For all the deluge of advice that the Obama transition team is receiving from every quarter, publicly and privately, about what the goals should be for his new administration, it’s obvious to all that addressing the precarious state of America’s economy has to be priority #1. (Yes, even over puppy selection.) The President-elect made that clear himself in his radio address yesterday, stating “I want to ensure that we hit the ground running on Jan. 20, because we don’t have a moment to lose.” Actually, maybe not even that: waiting all the way until next January 20 increasingly seems some sort of quaint constitutional anachronism in the face of what seems to be the accelerating decline in the American economy.

(As in, for example, Paul Krugman here: “Any way we can get current management at Treasury to take early retirement, and get the new guys in right away?” But remember that, until Franklin Delano Roosevelt’s second term in office, American presidents were in fact inaugurated on March 4 of the year following that in which they were elected. That four-month delay proved to be very dangerous a couple of times, most notably in 1861, when seven Southern states had seceded from the Union before Abraham Lincoln could take office, and in 1933, when FDR ascended to the presidency following a series of catastrophic bank-runs.)

For one thing, if they wait until next January 20 to do anything, General Motors may already be gone. That at least is the message from Jens Nymark in Denmark’s business newspaper Børsen: General Motors can be finished this year. (more…)

The Monster is dead, indisputably dead: General Motors, maker of the infamous Hummer, has made this clear, and anyone with a set of paired braincells can realize how jarring its big-box image and horrendous gas mileage comes across in this new era of high gas prices and global environmental concern. (Only in the military, one can assume, is its place not under threat.)

Of course, that is not welcome news to many. This includes many Germans, who come from a culture that does appreciate well-engineered motor vehicles, together with their unfettered use. Think of those renowned no-speed-limit Autobahnen. And since when were Germans ever known for their mass use of bicycles, as the Dutch and the Danish – and Chinese, etc. – are known for to this day?

No, through recent history the pride of Germany has been their excellent armored fighting vehicles, and then – once the sheer catastrophe of the Second World War turned them away from things military – their exquisite autos: Mercedes, BMW, Porsche, even Volkswagen. The last few decades, though, they have also taken up the cause of environmentalism in a big way – Germany is the country where you’re asked to sort your street-side trash by Glass/Paper/Packaging/Other, for example – and this has of course at times worked at cross-purposes with their automobile love-affair. (more…)