By on May 28, 2009

"We have made demands on the U.S. Treasury and expect answers by Friday and we will need these answers in order to agree on a plan." Picture courtesy

It was a long meeting that lasted into the wee hours of the Thursday morning. It ended with the German government throwing insults at the US government. Everybody went home or to their presidential suites with a headache and no deal. If there is no further movement, Opel will go down the drain with GM by Friday.

Before the meeting, there were rumblings that wrinkles had to be ironed out in a trustee plan that was supposed to be the basis for bridge financing provided by the German government. The money was supposed to keep the lights on in Rüsselsheim, while the proper groom for Opel is being groomed.

Mice and men impacted with US government greed. Or lack of their usual largess.

According to Reuters, German Finance Minister Peer Steinbrück voiced his “surprises and disappointment” with the U.S. negotiators, after GM left participants flabbergasted by announcing it needed $415 million more in short-term cash. Berlin had offered a financing bridge worth $2.1 billion.

Financial Times says Guttenberg “was shocked by GM’s last-minute revelation at the beginnings of last night’s talks of additional €300 million financing.” After that, 8 hours of meeting went nowhere.

It wasn’t so much the additional number (less than a week’s worth of life support provided by the US taxpayer for GM.) It was the nerve. And it was the representative of the Department of Treasury who threw monkey wrenches (they just bought a lot of them) into the trustee model. They made him suffer for that.

Ohne trustee, Berlin doesn’t trust that their Euros won’t go down the black hole across the pond. Finance minister Steinbrück complained that very little information is being provided by the US Treasury. Guttenberg described the D.C. disclosure as “marginal, to put it politely.”

With gusto, Berlin seized the opportunity to blame the klutzy Amerikaner for causing a bankruptcy of Opel, the best laid plans of mice, men and the German electioneering notwithstanding. Experts, amongst them the respected Ifo Institute in Munich, had urged Berlin to get it over with, take Opel bankrupt and restructure. Not without reason, they point out the fallacies of supporting surplus production capacities with tax money. Ifo urged Berlin not to cave in to what Ifo called “blackmail.” But it’s an election year in Germany, and no politico wants to get caught doing something rash.

Payback time. Now, the buck can be passed to dollar-greedy DC:

“We have made demands on the U.S. Treasury and expect answers by Friday and we will need these answers in order to agree on a plan,” a visibly grumpy Economy Minister von und zu Guttenberg said. “We don’t have the security yet that we need to commit to bridge financing today.”

Harsher words weren’t spoken since “This time we mean it, that the deadline absolutely cannot be changed. After that things are automatically going to happen . . .” That sentence was cabled from Tokyo to the Japanese embassy in Washington on November 22nd,1941. And we all know what things happened two weeks after that.

Just this time, it will be Berlin bombing Rüsselsheim. And instead of “banzai!” it will be “Obama made us do it!”

To prepare the battlefield, insults are being hurled in the direction of D.C. by indignant participants of the all-nighter. Herr von und zu Guttenberg talked of a “partially bizarre night.” Steinbrück called the last-minute-demand for more moolah “impertinence.” Hesse’s premier Koch kvetched about a “not very helpful negotiation style of the American side.”

“The guy from Treasury is a nincompoop,” said Guttenberg. Or words to that effect. The blueblooded holder of the economy portfolio said it with more grace and a highly honed edge: “We would like to state that the U.S. Treasury could have displayed a little more care in choosing their representative.”

Klaus Franz, head of Opel’s works council, echoed the accusations of amateurish strongarming: “The German government is right in not allowing General Motors to blackmail it. It demands from GM to either pay for the additional financing need or to give a guarantee to cover it. General Motors has to know that Europe is no casino for gamblers. It is solely for General Motors to bear the blame, as they wanted to make us a puppet in the poker game about their bankruptcy.”

Now, another meeting has been scheduled for Friday. If no agreement can be reached by the week-end, “the danger of bankruptcy is very high,” several participants of the meeting opined to Der Spiegel. From the tone of their comments, hope for a hunky-dory outcome doesn’t seem to run high.

Anything else happened in the meeting? Not much. The suitors were whittled down to two and a half. To nobody’s surprise, the bidding battle for Opel has narrowed to a race between Fiat and Magna. Fiat and Magna were asked to do more homework and come up with sweeter deals. RHJ is definitely out. BAIC remains the dark horse. They weren’t officially disqualified from the race because it was determined that they never had officially entered.

The race for buying Opel and Vauxhall could still widen again to three as BAIC managers and advisors are set to meet the German government next week, Financial Times learned: “People close to the situation said that the Chinese carmaker still had a slim chance to enter the process and comb through the carmaker’s books if the government approved its takeover proposal.”

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11 Comments on “Opel Watch: Kafka, Revisited...”

  • avatar
    Stein X Leikanger

    That sound … is the sound of nightmares.

    Clearly, we’re seeing how entirely clueless the politicians (who should have had oversight) have been, as the auto industry dug its own grave.
    Easy credit made it possible to load up cars in size, power and features – and made it possible to sell cars to more people, or more cars to each consumer.
    Without easy credit, the executives wouldn’t have looked so good. But it wasn’t their R&D, products or ingenuity that contributed to the bottom line in the good years – it was easy credit.

    They still rewarded themselves handsomely, for something they didn’t contribute to, while ignoring the looming crisis.

    The sound of nightmares, indeed. I don’t know – a lot of people here wax lyrical about the power of the free market, and I’ve personally made some comfortable coin from it, but it doesn’t really work very well, does it?

  • avatar

    Exactly, Stein.

    And more easy credit they want. Just don’t know it any other way. People can’t get easy credit? Well, then it’s gotta be easy credit for corporations. The too big to fail ones. Except that nobody dreams that it will ever be paid back.

  • avatar


    I’m not getting what you are saying. First you say the politicians should have had oversight but yet they are “clueless”. That to me does not seem like a good combination.

    Second you say the free market doesn’t work that well. It has worked very well. For all the “gaming” of the system, the chickens have come home to roost and even the all-powerful governments and their (our) money can’t stop it.

  • avatar
    John Horner

    “Read “Atlas Shrugged”.”

    I have. It’s an adolescent fantasy. When I was 19 it fascinated me, but I’ve grown up. Now go read Nathanial Branden’s “My Years with Ayn Rand”.

    “We have made demands on the U.S. Treasury and expect answers by Friday and we will need these answers in order to agree a plan,” Economy Minister Karl-Theodor zu Guttenberg said. “We don’t have the security yet that we need to commit to bridge financing today.””

    Hmmm, sounds like the Germans want unlimited guarantees from the US Treasury that any investment German politicians make in keeping factories open and their own sort of jobs bank going; must be paid for the the USofA. Sorry Germany, time to pay your own way. How about mounting your own defense against any possible Russian invasion while you are at it as well. Besides getting out of the business of propping up companies at home, the US really needs to get out of the business of providing much of Europe’s military defense. Our little 5% of the world’s population cannot afford to continue maintaining a massive military presence around the globe.

  • avatar

    Why should the U.S. side really care?

    Opel is wholly owned by GM. The U.S. gov’t has poured a whole lot of money into GM, and it still is headed to bankruptcy court for reorganization, because that’s how bad things are.

    If the Germans are afraid that jobs and factories on the Opel side will be cut as part of that reorganization process, that’s their problem. If the German gov’t wants to save jobs or political face by spinning off Opel into an independent entity and then subsidizing it, well, let them pay for the fun. Let them pay GM whatever it takes to convince the parent to spin off the subsidiary, or let them seize the assets of the subsidiary, furnish operating capital, and hash out at some later date the compensation due GM. Germany does not have a 5th Amendment per se, but I am certain they have something substantially similar — take the assets, run the company, and pay the bill, if that’s what you want.

    I don’t particularly like the way the auto bailout has been going so far, but I have some sympathy for the notion that a sudden, catastrophic and uncontrolled automaker bankruptcy (or two) would have created major social and economic shock waves that would have left us all even worse off than we are now. It’s another version of the “too big to fail” argument we’ve seen with the banks. It may have been bad policy to allow consolidation to such a degree, but the past is the past, and the important question is what’s the best choice out of some bad options right now.

  • avatar

    Well Said!

  • avatar

    You’re misunderstanding the kind of disagreement here.

    Nobody in Germany wants America to bail out Opel. The point is that the US government doesn’t want a complete spin off. In case of a GM bankruptcy, they want to tap into the German bail-out money.

    Of course the Germans cannot accept that. This would mean that they pay billions to Opel in order to save the company, only for the money to be transferred to GM creditors in case of a C11…and Opel would be just as bad off as before.

    Also, GM all of a sudden wants an additional €300-350 million right now, on top of the already promised €1.5 billion…

    Of course this won’t work.

  • avatar

    Thank you, Tom. I thought I had explained that, but not as succinctly as you just did.

  • avatar


    Yes, it seemed as if everything was ready for a spin off…that’s why the German government felt stupefied…

    Peer Steinbrück, the German treasury minister said towards the US government and GM:
    “The information we get only has a very short term validity. And I’m being very civil here.”
    He also mentioned a lot of “intransparency” concerning the US position.

    Others even said that “this could become a real problem for German-American relations.” and that the us negotiators “were not fit to make agreements.”

  • avatar

    bluecon: The wet-behind-his-ears junior staffer Treasury sent to negotiate with half of the cabinet and premiers of all Opel states made it clear that the transfer wouldn’t happen: Sorry, didn’t mean it. More or less politely, the U.S. government was told that lies won’t be tolerated. And that there is something called common courtesy: You don’t send a moron who behaves as if Berlin is a district of Chicago. The U.S. side overplayed its hand. It united the electioneering parties against a common enemy. And they made it politically palatable to let Opel go bankrupt: We tried everything. But the U.S. side screwed the pooch.

  • avatar

    When I read the FT story this morning, I kind of figured that the C Team from GM and Treasury weren’t ready for prime time in any European capital.

    Where this smoke there is fire. This episode shows that the B Team and C Team at Treasury are definitely operating out of their depth with regards to reorganizing GM and Chrysler.

    It sure would be nice to learn the name of the person representing the US Treasury. My guess is this person wouldn’t know a Delta platform from an Epsilon platform or where each is made.

    Anyway, Der Spiegel International weighed in this afternoon with an English version.,1518,627380,00.html

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