GM and German Government Still Wrangling Over Opel

GM and German Government Still Wrangling Over Opel

German Chancellor Angela Merkel’s race to save automaker Opel — and the jobs of its 25,000 employees in Germany — is beginning to look like a high-speed pileup that could cost her at the polls.

To get talks with Opel owners General Motors back on track, Merkel is reportedly ready to abandon her previous plan to force GM to sell a controlling stake in its European business to a consortium of Canadian-Austrian car-parts maker Magna International and Russia’s Sberbank. According to the German tabloid Bild, the German government has told GM’s chief negotiator, John Smith, that Berlin will consider GM’s preferred investor, the Belgian industrial group RHJI, as long as it teams up with a partner from the automotive industry.

With Germans set to vote in parliamentary elections on Sept. 27, Merkel seems eager to create an exit strategy on Opel in case negotiations blow up on her. “The situation is that we have decided with a clear preference to advocate the Magna plan,” Merkel told German television channel N-24 on Aug. 26. “There is a good possibility that we will come together in the end.”

The German government has been negotiating with GM over Opel since March. The U.S. automaker wants Germany to provide state guarantees for Opel of up to $6.4 billion. In return, the Germans wanted GM to agree to sell a 55% stake in Opel to the Magna-Sberbank consortium. At first GM seemed to be playing ball. It spun off Opel into a trust to protect the RĂ¼sselsheim-based manufacturer from GM’s Chapter 11 proceedings in the U.S.

But in May, talks stalled and Merkel declared the entire GM-Opel mess to be “chefsache,” or a matter for the boss. After lengthy and tense talks, GM negotiators finally seemed to agree to the German plan.

Over the past few days, though, everything has come undone again. GM’s management, which now includes U.S. government appointees after Washington’s massive bailout of the Detroit firm, is split. Some on the board want GM to sell its European operations and focus on the U.S. market. And GM cannot use money from U.S. taxpayers to restructure Opel.

But GM’s chairman, Ed Whitacre, isn’t convinced that a sale is in the company’s best interests. He still sees GM as a global manufacturer and is determined to retake the No. 1 spot from rival Toyota. To do so, GM needs a European manufacturing base. At the very least, GM wants to avoid creating a new competitor by providing the dowry for a tie-up among Magna, Sberbank and Opel. So on Aug. 21, the GM board rejected Merkel’s plan and sent point man Smith back to Berlin.

Merkel has tried, and failed, to get President Barack Obama to intervene. Her rival for the chancellery, Frank-Walter Steinmeier, Foreign Minister in the grand coalition government that joins Merkel’s Christian Democrats and his Social Democrats, called Secretary of State Hillary Clinton, urging her to get involved. But the message from Washington is that it’s up to GM to make its own investment decisions.

German commentators have criticized the almost amateurish way in which Merkel and Steinmeier have risked turning GM and Opel’s misery into a transatlantic dispute. Neither GM nor the Obama Administration, which appointed 10 of GM’s current board members, appears to like the idea of handing Opel — and GM patents — to a consortium at least partially controlled by Russian oligarchs. “Neither the Chancellor’s phone call with the American President nor the Foreign Minister’s with Mrs. Clinton impressed anyone,” wrote the conservative Frankfurter Allgemeine Zeitung in a commentary published on Aug. 26. “It is questionable whether their decision to commit themselves to a Canadian-Austrian bidder with Russian backers was helpful to achieve their ends.”

GM is now exploring other options, including the possibility of raising money from other European sources. According to a report in the Times of London, U.K. business secretary Peter Mandelson is offering GM some $800 million if GM could guarantee the 5,500 jobs at its Vauxhall unit. Last week, Mandelson slammed the Germans for trying to buy protection for their car workers at the expense of GM employees in the U.K., Spain and elsewhere in Europe.

But Merkel’s biggest headache may come from Opel’s workers, who are fighting mad over nine months of discussions that have produced little but more uncertainty about their jobs. “We have run out of patience,” Klaus Franz, Opel’s works council chief, said this week. “We have been calm so far, listened diligently and made comments, but that is over now. If nothing changes from General Motors’ side by the end of this week, then we will be active, and there will definitely be spectacular measures from us.”

In an election campaign that has lacked emotional issues, anger over GM and Merkel’s handling of the Opel crisis could end up hurting her if it fuels support for leftist parties. This weekend should provide a hint at what could come in September, with elections in the states of Saarland, Thuringia and Saxony. “GM’s management is leading the government around by the nose and abandoning the Opel workers,” said Bodo Ramelow, a leading official of Die Linken, successor to the former East German Communist Party, who is running for governor in Thuringia. “It’s time for the Chancellor to show what her supposedly good ties to President Obama are worth.”

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