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…)

Sorry, we have to leave the sexy now for the serious. The big news of the past week on the European auto-manufacturing front was the announcement – finally! – of the fate of Opel, for eighty years the General Motors subsidiary operating in Europe, especially Germany. The winner for Opel’s hand is Magna, a Canadian-Austrian investment consortium working together with the Russian Sberbank as financial partner (and also with the Russian auto company GAZ). The announcement was that GM is willing to sell to Magna a majority stake (55%) in the new company, while it retains 35% (and the Opel workers the remaining 10%).

From there the story proceeded just as it always does when a company gets a new owner, especially in the case of a failing firm where that new owner is being counted on to come in and rescue its fortunes. Clearly, drastic cuts have to be made – but who will bear them?

The answer has always been pretty obvious, but it seems that “De Nile” is not just a river in Egypt, somehow it also flows through Flanders. Opel’s factory located in the harbor area in northern Antwerp was always the leading candidate to draw the short straw and face closure as part of any attempt to reorganize the company. The leading negotiator for General Motors – one John Smith – openly said as much: “In our plans Opel Antwerp is superfluous.” Nonetheless, it’s amusing to read in coverage of the new Magna deal in the Flemish business newspaper De Tijd about the refusal of many parties still to accept that reality. After all, points out Luc van Grinsven, spokesman for the ACV union that represents most of the plant’s workers, that’s only a GM official saying “superfluous,” not anyone representing Magna, i.e. the actual new owners. “The exact consequences of the take-over are not yet clear,” claims Van Grinsven. “But GM after the take-over has no more authority.” And Flemish regional president Kris Peeters is still clinging to a letter he received from Magna at the end of July, assuring him that the company intended to investigate further what possibilities there may be for the future of the plant. (more…)

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.

Parallel to the ongoing drama in the United States over the survival of two out of the “Big Three” automakers – whether to give GM and Chrysler the new money they have come back to the federal government to ask for, or just to cut off what looks like a never-ending money-drain but thereby administer a severe economic shock to the American Midwest – European auto-makers are also having a difficult time in the current economic climate, and so there has been discussion about various bail-out plans (and implementation of a few) over here as well. Of course, that comes as no particular surprise when the European auto-maker in question is actually a subsidiary of one of those American firms that are seemingly in terminal decline, such as is the case for Saab in Sweden (a GM subsidiary, which has already filed for bankruptcy protection) and Opel in Germany (full name “Adam Opel GmbH,” also belonging to GM, in fact since 1929 except during World War II, when its facilities were bombed instead). With Opel reported ready to run out of cash within a few months, the pressure is on to find some solution to save the firm, particularly given the fact that, as a foreign facility, GM is likely to afford it low priority as it scrambles to save its core operations in the US. Indeed, the current preferred solution is to detach Opel from its parent company entirely, possibly at that point to form a new multinational car company around it and Saab and Vauxhall (another GM brand, based in the UK). But that would be a complicated and contentious operation, given that GM is still the formal owner of not only the physical plant but other essential things like the trademarks and many technology-patents.

Nonetheless, it seems that a popular groundswell of sorts has arisen insisting that some solution be found to save the firm, one that goes beyond the Opel employees and shareholders who would be directly hurt by a shut-down, according to an article by Harald Blum in Der Spiegel (The Hour of the Fans). The lede tells me something that I didn’t really know, and still wonder whether I should believe: “Autos from Opel are for many grey and dull – yet hardly any other German auto-brand has the same loyal followership.” As proof Blum points to the website rettetOPEL.de (rettet Opel itself is German for “save Opel”), where you can find four separate 500-slide slide-shows of sentimental pictures sent in by Opel-owners of their cars and/or Opel-typical tableaus. And you do have to wonder: is anything similar happening in response to the seeming death-throes of General Motors or Chrysler, or at least in honor of any of those firms’ individual brands?

Of course, Blum’s claim about Opel’s “loyal followership” is still hard to credit when you remember that it is German cars that we are talking about here: I daresay that BMW, or Porsche, easily inspire at least a similar fanaticism among their owners, but then neither of those is (yet) in the same financial trouble as Opel. Still, he also uses his article to remind us of that auto-maker’s glory days: of the Rekord, for example, the long-time best-seller nicknamed “the Reliable,” or the GT, a sports car which provided a riding-thrill said to be second only to actually flying, and others. But he is also honest enough to make note of the firm’s disappointing recent performance, starting really right after it pioneered in the introduction of the catalytic converter in the early nineties (but such “green” features have never really been powerful arguments to buy any car), when its model-design lost its previous distinctiveness (its “identity”) and its market share dropped from 20% to around the 7% it enjoys today – “thereby lying under that of its arch-rival Ford, which especially rankles true fans.”

So why act to save it? you could therefore ask. The Ford German subsidiary regularly sells more cars and therefore, like Ford, Inc. itself, has managed (so far) at least to stay out of trouble enough to not have to ask for government money. Well, as Blum explains at the end of his piece, recent Opel models have been earning rave reviews from professional auto-testers and auto-magazines, so things seem to be looking up on the design front. And there are those thousands of Opel fans. But is all that enough?

German Finance Minister Peer Steinbrück is currently in Washington, attending that “G20” summit that is supposed to restructure the international financial system – i.e. to bring about a “Bretton Woods II” – to deal with the current world-wide economic troubles. But after this weekend he’ll not be back at his Berlin office long before he’ll face yet another economic summit, reports the German business newspaper Handelsblatt: Steinbrück calls Opel-Summit.

That’s “Opel” as in “Adam Opel GmbH,” the German-based daughter auto-making concern of General Motors. As you can imagine, it’s currently in financial trouble; this past week it directed its own appeal for help to the German government (actually governments, see below). And so, in more-or-less mirror-image to the issue the US government is now having to confront, Germany is also now taking up the same dilemma: should its auto-makers be bailed out to save the many thousands of jobs dependent on them? Or would that be throwing only the first installment of massive monies to an industry that is anyway doomed with no future? (more…)