GM Mortgaging China to Save Opel?

Edward Niedermeyer
by Edward Niedermeyer

There’s some surprising news in Automotive News [sub] today in GM’s ongoing attempt to save Opel (and, more importantly, its intellectual property). Since the German Government shot down the only proposal that would keep Opel IP with GM, the General is scrambling to prevent its erstwhile German arm from falling to Magna and GAZ/Sberbank. But who on earth would give GM the $4 billion it needs (now) to keep Opel on board the mothership (for the moment)? Surely only the American taxpayers are that gullible! Unfortunately for GM, there’s a catch. Automotive News explains:

Because GM is barred from using funding from the U.S. government from its reorganization in bankruptcy to support its international operations, one of the options could include raising money by selling or mortgaging the automaker’s assets in China, one of the sources said.

Ruh-roh! China is widely acknowledged to be GM’s saving grace. The General enjoys a long-term presence and favorable brand image in the world’s largest and strongest market for cars, and it could be argued that Chinese profits kept GM from gong bankrupt years ago. On the other hand, Opel’s sales fell more than ten percent in 2008, part of a sales erosion that dates back years. The problem? GM’s recent $9 billion investment in Opel (current status unclear), $6.5 billion of which was planned for new product development. Much of that money presumably generated products and platforms that GM is counting on to fill out its global portfolios. If all that IP goes away though (and again, that “if” is based on how much of that investment was made before GM’s bankruptcy), GM could be forced into greater dependence on its less-lauded Daewoo division to develop global products.

What’s a multinational to do? GM could probably find plenty of offers for loans backed by GM China assets, but only because the assets are valuable and the risk of GM eventually defaulting are high. Losing China to save Opel would be GM’s final epic blunder, but losing a major source of future product development and IP won’t be good either. GM is so not out of the woods, it isn’t even funny.

Edward Niedermeyer
Edward Niedermeyer

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  • Wsn Wsn on Aug 26, 2009

    A more realistic way for GM, is to find a rich Chinese partner and buy Opel. That way GM still has 50% and the Chinese partner will need GM's expertise in running the company. Just like GM-SAIC.

  • Christy Garwood Christy Garwood on Aug 26, 2009

    FYI jerry weber from GM employee communications sheets: 2010 La Crosse EPA/Powertrain: 3.0 & 3.6 Engine dual overhead cam, direct-inject 6 cylinder engines fuel-conserving six-speed automatic transmission: 27 hwy/18 city MPG Available Late 2009 - Ecotec 2.4L Four-cylinder engine - 30hwy/20 city MPG

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