By on July 29, 2009

Did we say the Opel sale is getting messier and messier? GM seems to be in urgent need to attend remedial reading class.

There is the German government making noises that if GM doesn’t say “Ja” to Magna, the government can’t guarantee that another suitor gets loan guarantees. Which in German means, they won’t. GM can’t read the writing on the wall.

Then, GM wants a buyback clause. RHJ happily wants to give one. The German government says: No way. GM can’t read the writing on the wall.

Then someone leaks a supposedly confidential analysis that says that all bids are no good. The specter of bankruptcy is being raised. GM can’t read the writing on the wall. Magna immediately sweetens their bid. RHJ, GM’s darling, does nothing. GM can’t read the writing on the wall.

Now John Smith, GM group VP (and GM’s chief negotiator for the sale of Opel), goes on GM Europe’s website and writes with a supposedly straight face, “despite media reports to the contrary, GM has NOT specified its preference for a bidder.” They did not?

The German government sure thinks GM has a preference: RHJ. According to Der Spiegel, John Smith just received a letter from the German government in which he is reminded that the “loan guarantees come with conditions.” The letter was prompted by John Smith telling the German government that he prefers RHJ. GM can’t read the writing on the wall.

Just in case anybody missed the fact that GM can’t read the writing on the wall, John Smith clearly spells out a preference in the same post on the same website.

He word-smiths that the Magna bid “contained elements around intellectual property and our Russian operations that simply could not be implemented. GM has partners in other parts of the world who have joint ownership of these assets . . . we simply could not execute the deal as submitted.”

Supposedly, “discussions with Magna continue in earnest to resolve these challenges.” Yeah, sure.

What about RHJ, for which GM supposedly has no preference? Smith gets excited: “The bid from RHJI is completed and would represent a much simpler structure and would be easier to implement. It would require less monetary participation by the government and would keep our global alignments solid, while still creating an independent Opel/Vauxhall organization in Germany. This remains a reasonable and viable option to be considered as the very difficult issues around the Magna negotiations continue to be worked.”

Does this still sound like no preference?

GM either can’t read the writing on the wall. Or they just aren’t interested in selling Opel. They also are totally ignorant of German politics.

Germany is heading into an election in September. Economy Minister von und zu Guttenberg had opposed an Opel bailout since day one. Guttenberg still “cannot rule out an Opel bankruptcy,” writes the Manager Magazine. This position made the baron from Bavaria the darling of the people. Guttenberg just advanced to Germany’s most popular politician, before chancellor Angela Merkel. Even the Social Democrats, who are indicated to lose the elections by a landslide, don’t want to touch the hot potato Opel more than absolutely necessary.

GM quickly needs to find their glasses and read what it says in big letters on the wall: “No RHJ. No buyback option.” If they don’t, and especially if the matter is not settled until the elections, German politicians will remember what is recommended as the best prevention against swine flu: Wash your hands. Of the Opel mess.

If that happens, Berlin saves billions in loan guarantees. Opel goes bankrupt. Then, BAIC might get Opel after all. For real cheap.

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19 Comments on “Editorial: GM Can’t Read...”


  • avatar
    Stingray

    They just aren’t interested in selling Opel.

    This pretty much summarizes it.

    I bet they want an easy bailout. While keeping Opel.

    They also are totally ignorant of German politics

    I am. But a big company as GM SHOULDN’T. CAN’T. MUSTN’T . Period.

    So.. PWNED they will get.

  • avatar
    Robert.Walter

    Another great piece Bertel … please keep it up!

    What I am missing here is who actually owns Opel? Old GM, New GM, die BRD (the FRG), banks, etc. and why does GM have any say here?

    If GM doesn’t cooperate, can’t the FRG just pull its life support and do an auction?

    And at the same time, what has GM got to lose by playing “liar’s poker”? (BTW, I don’t think it is any surprise that John Smith writes with a forked-tongue … this is SOP in the C-Suite (I presume you know this well from the days of your WOB affiliation. I’d love to hear some of those stories!!))

    Es Grusst.

  • avatar
    MikeInCanada

    GM has developed a pretty good batting average at getting governments to cave in and cough up some cash.

    They know all too well that the German gov’t does not care about them – rather it’s all about ‘jobs’. At the end of the day, irregardless of the owner, there is going to be a handout….

  • avatar
    KatiePuckrik

    This proves that GM hasn’t changed a bit.

    After outsourcing a lot of production abroad, they’re now outsourcing their management.

    The only reason they want the buyback clause is because they don’t want to be the one to deal with the unions (you thought North American unions were tough? Check out the European ones!). They’d rather give the job to someone else and buy back the company. Sorry but it doesn’t work like that.

    They’re quite happy for the German (and UK) government to stump up money to help Vauxhall and Opel, but not so helpful when it comes to letting Vauxhall and Opel go to a new owner who might save it?

    They got a clean slate from the US government and now want one in Europe.

    Vauxhall cars are rubbish, anyway (except for the Insignia). There’s plenty of better cars to choose from.

  • avatar
    Bunter1

    I have faith the GM can snatch defeat from the jaws of (what they are deluding themselves is) victory.

    New GM + gov’t < Old GM.

    Muttonheads.

  • avatar
    PaLo

    The problem is that GM wants to sell Opel to someone who doesn’t actually want to build and sell cars.

    “Sure you can buy, Opel… You just can’t sell cars in North America… Or Russia… etc.”

  • avatar
    Geo. Levecque

    Magna wants to be able to sell Opel Cars in North America if they think they will sell in future, GM does not want this, that’s for sure, old GM or New GM, its the same story,over and over again.

  • avatar
    Edward Niedermeyer

    GM is denial because it needs Opel to develop new cars/platforms for the US and global markets, right?

    It will be interesting to see how GM’s product plans change when Opel inevitably ends up in Magna’s hands.

  • avatar
    akear

    Wagoner and Putz outsourced most of GM’s North American engineering to Opel. Now GM North America is so hollowed out they can’t build a vehicle from scratch.

    They are really screwed.

  • avatar

    What GME doesn’t seem or want to understand is that „insolvency“ is not a bad word anymore in Germany. Germany counted 16650 insolvencies in the first six months of 2009. The estimate for the full year is 35000. This translates into 254000 lost or endangered jobs. This number is expected to increase to 540000 by the end of the year. Opel has 54000 jobs in all of Europe. After a takeover, this number will drop to 32000 anyway, 22000 less, the Opel works council estimates. Opel Germany has 29,000 jobs. Worth the €4b (more or less) in loans, which most likely never get repaid? People are quietly thinking whether it is worth keeping those jobs alive. There are overcapacities. It might be healthier to let Opel die to keep other car makers alive. In any case, bankruptcy doesn’t mean that Opel closes. It could mean that the main creditor, the German government, could own Opel outright. Another writing on the wall GM refuses to read.

  • avatar

    Just by what numbskullery does GM think, by any means, that beggars (them) get to be choosers?!?!

  • avatar
    CarPerson

    How long, how painfully long must we wait for the deluge of books detailing the incredible depth of GM’s contempt and arrogance for everyone they do business with? They are 6-feet under in their own sewage but are thoroughly convinced they still have the world by the ass.

    How long will it be until Barns and Noble has a full shelf exposing the total folly they have been up to for the last 20-odd years?

    Bail them out? No. Throw another shovel-full of dirt on them and declare the dead, dead. Too incredibly stupid to survive.

  • avatar
    Greg Locock

    Bertel – Nice use of conduplicatio!

  • avatar
    paris-dakar

    GM has partners in other parts of the world who have joint ownership of these assets . . . we simply could not execute the deal as submitted.”

    Well, if that’s the case then, it sounds like liquidation is the only viable option.

    GM shouldn’t play chicken with the Germans. They’re not going to blink. The assets are in their jurisdiction and possession is 9/10 of the law.

  • avatar
    folkdancer

    How long will it be until Barns and Noble has a full shelf exposing the total folly they have been up to for the last 20-odd years?

    Actually the downfall started about 58 years ago when GM said we are rich and can take care of our people, we don’t need socialized medicine.

    Then the downfall continue in the 60s, 70s, and 80s as GM whined about meeting new safety, pollution, and economy laws while the Germans and Japanese quietly met the challenges.

    GM management never realized that challenges can be opportunities.

    Almost finished reading “House of Cards” about Bear Sterns (well written – very exciting) and I too am waiting for the books on GM’s downfall. Maybe we will have to wait a few months until GM is completely gone.

  • avatar
    paris-dakar

    People are quietly thinking whether it is worth keeping those jobs alive. There are overcapacities. It might be healthier to let Opel die to keep other car makers alive.

    What a novel concept, address long-term issues with industrial over-capacity by getting rid of the weakest and least attractive producers.

  • avatar
    Pch101

    It can’t hurt GM to ask. If they get what they want, they lose nothing; if they don’t get what they want, they’re exactly in the same place that they are right now.

    Of course, it does hint that the new GM may be aspiring to become the old GM. And we all know how well that worked out.

  • avatar
    wsn

    # akear :
    July 29th, 2009 at 6:05 pm

    Wagoner and Putz outsourced most of GM’s North American engineering to Opel. Now GM North America is so hollowed out they can’t build a vehicle from scratch.

    They are really screwed.

    ————————————————

    I truly don’t understand why are they selling Opel now.

    I mean, they have the $50B from Obama/Bush to spend for the next while. What’s such a big deal to sell Opel for another $1B cash? After all, the bleeding from Opel is just a very small percentage in its entire operation.

    If they sell Opel, the cash generated will be inconsequential to their survival. And they lose engineering capability as indicated by akear. And they face more competitions in NA and China if Opel is sold to Magna or BAIC. And they will miss out a rebound when there is one.

  • avatar
    rx8totheendoftime

    No they can’t read and never could. first realized it when they came on campus to recruit MBAs 25 years ago and hired one student.

    Did they hire the best student in…marketing, production, finance, etc.? No, they hired, from the most prominent business school in the country (Canada)…a truly astonishingly beautiful women who was on probation for lousy marks most of the way. She got lots of help from her fellow students, of course, and got through.

    Mind you, I would have done the same thing…even though she turned me down when I asked her out.


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