By on February 13, 2010

The German magazine Der Spiegel got its hands on an internal document. In the paper, the German economy ministry gives an awful assessment of the business plan that Nick Reilly had circulated amongst interested parties. Interested parties being the countries where Opel has plants and where GM wants to collect €2.7b in government aid. The Spiegel’s article will appear in the printed issue on Monday. But there are some damning pre-releases.

Minister Rainer Brüderle has serious doubts about Opel’s restructuring plan. “The viability is questionable,” the internal memo says. The planned job cuts are “hard to understand.”

And once more, Germany’s all-time phobia when it comes to Opel aid emerges: According to Brüderle’s paper, there is a risk that state aid for Opel will ooze away to Detroit, for instance as license fees. “A ring-fencing plan has not been presented,” says the Brüderle expertise.

The states where Opel has plants already see the writing on the wall and probably have seen the writing in the memo. According to Der Spiegel, the states have already written off aid from Berlin. There is talk that the states would come up with €750m, but only if GM matches the sum to bring the total to €1.5b. A symbolic gesture, as Reilly had already said that there won’t be another dime from Detroit. A “nein” from Berlin would also set a precedent for other countries. Why pay if Germany won’t?

As another sign that Germany wants to put a knot in the purse strings, Brüderle asked the EU in Brussels to rigorously examine the legality of any support for Opel. He requested the vice president of the European Commission Joaquín Almunia, “to examine critically whether the business plan is viable and whether competitive distortions in Europe can be excluded,” said Brüderle to the Sueddeutsche Zeitung. Not that he’s against Opel. His first car was an Opel Kadett, a hand-me-down from his dad. Now, Brüderle’s car is a Mercedes.

Before any money will flow from any EU government, Brussels has to bless the plan. It’s pretty obvious that Brüderle is setting the scene for a desecration instead. Any guesses that Brussels will certify the viability of Reilly’s plan if Berlin thinks the proposal is questionable? Opel profitable in 2012?

One thing becomes clear: Nobody is tripping over each other to bail Opel out. Of course, the other automakers, from VW to Daimler, are against it. Surprisingly, even the unions demanded that the plan is not to be funded. In the public opinion, Opel is off the Radar. Europe has too much capacity, and Opel won’t be missed. As the incentive measures are petering out, industry groups see 2010 sales in Europe, in Germany especially, collapse. Russia is a nut case. Somebody has to go. The engineers in the Opel tech center will find a job elsewhere in a few seconds, there is a shortage.  The growth market is China, and without Opel technology, GM China will be selling Daewoos. Which would suit VW et al just fine.

Update: Faced by heavy opposition from all flanks, Opel is ready to sue for peace. An Opel spokesperson said to the Deutsche Presseagentur that management and unions will sit down at the bargaining table. Works Council leader Klaus Franz said the “workers are ready for constructive negotiations,” as long as there “is a will to compromise.” A date has not been scheduled yet.

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32 Comments on “Berlin Has “Serious Doubts” About Opel’s Turn-Around Plan...”


  • avatar
    fred schumacher

    There were no complaints from Germany when Daimler siphoned off billions of ready cash from a once profitable Chrysler when Mercedes was in trouble.

    From this side of the pond, the situation seems clear: give some money to Opel and most of the jobs will be saved and some will be lost; give no money to Opel and all the jobs will be gone, forcing GM to look elsewhere for small car technology. You can bet they won’t come back to Germany.

    • 0 avatar
      FromBrazil

      You are a wise man Mr. Schumacher. You summed in in a few words the situation.

      And let’s not forget, Mr. Schmitt himself called it the Germans biggest fear, to lose any monies whatsoever (even if they lose in the long term).

      Ouch, the world survived this crisis thanks to US largesse. If the US were to suddenly slap higher import tariffs across the board, they would kill the world (and also probably rise much faster out of their recession).

    • 0 avatar
      Hippo

      They can always try competing with their wonderful state of the art Daewoo technology.

    • 0 avatar
      Vega

      “There were no complaints from Germany when Daimler siphoned off billions of ready cash from a once profitable Chrysler when Mercedes was in trouble.”

      That didn’t involve any state money. Also, I’ve driven too many 90s Chrysler products to believe in conspiracy-theories. Badly managed merger? Definitely. Masterplan to destroy brilliant Chrysler? Please…

      “give some money to Opel and most of the jobs will be saved and some will be lost; give no money to Opel and all the jobs will be gone, forcing GM to look elsewhere for small car technology. You can bet they won’t come back to Germany.”

      There is overcapacity in Europe anyway. Letting Opel die will only strengthen Volkswagen. They have a lot more employees in Germany anyway. Should Opel go under, their best engineers will find new jobs at VW, Audi, BMW, Mercedes, Ford cologne, etc.
      And looking at what usually is the result from “GM looking elsewhere for small car technology”, I’d say GM needs Germany more than Germany needs GM…

    • 0 avatar
      wmba

      “NEW YORK (CNNMoney.com) — DaimlerChrysler moved to undo the most expensive and one of the least successful mergers in auto industry history Monday as it agreed to essentially pay to dump the money-losing Chrysler unit, which it paid $37 billion for nine years ago.” 2007 May 14.

      I am struggling to figure out how Mercedes losing $37 billion on Chrysler equates to “siphoned off billions of ready cash” from the company. Is this an opinion or fact? If fact, perhaps you can point me to a link where I can educate myself. TTAC went into this when Cerberus took over, and pointed out that Mercedes even paid them extra to get rid of Chrysler, they were so desperate to be rid of the automaker.

    • 0 avatar
      AccAzda

      I have to ask…

      Opel is the only one that’s doing anything decent (design and engineering wise) for GM as a whole.
      They put together the Insignia and its frame for everyone else to mooch off of.

      Heck,
      GM even admitted that they are totally and absolutely INCAPABLE of producing a competitive A,B,C segment car and have left that to DAEWOO.

  • avatar
    twotone

    Looks like he is about to shoot himself in the head. Is it really that bad?

    Twotone

  • avatar
    Robert Schwartz

    Maybe GM could merge Opel with Greece, then Germany could float both of them at once.

  • avatar

    Somebody – everybody is calling Whitacre’s bluff. If you think you’ve got the better hand, put money on the table.

  • avatar
    albert

    It’s a pity that Opel isn’t based in France.
    Mr. Sarkozy would be the first to reach a helping hand.

    (and who do you think will pick up the tab for the 3 billion € loss that renault put on the table for 2009?)

  • avatar
    rmwill

    Big Ed is playing the Germans like a fiddle. Its a very easy choice for Mrs. Merkel. German money or the jobs will go bye bye. Serves her right for meddling with the Magna and Skerbank hijack attempt.

    Like it or not, Big Ed is in the drivers seat on this one. Its nice to see the meddling politicians get taken to the cleaners.

    • 0 avatar
      Znork

      What? You must be confused.

      You’re right that the choice is simple, but it will not be giving GM money. Opel is of no importance to Germany, the only one they are important to are GM.

    • 0 avatar
      Cammy Corrigan

      rmwill,

      What are you talking about? It’s actually a no brainer for Frau Merkel. She’s already been re-elected so doesn’t have to worry about annoying her voters. The consensus in Germany is let Vauxhall/Opel fail as Volkswagen will probably gobble up the market share left by Vauxhall/Opel (Ford may take some as well, but that’ll be more in the UK, they love Fords over here. Goodness knows why.). The bailout loans posited by the German government were considered a bad idea economically, but Frau Merkel went along with it until after the German elections.

      If anyone is going to suffer from this state of affairs (apart from the workers) it’s going to be GM. Vauxhall/Opel is a rich vein of technology and access to a good market (i.e the European market). They stand to lose the most. No matter which way you slice it.

    • 0 avatar
      wmba

      @rmwill:

      Big Ed is the twit, not Merkel. Perhaps you recall that he said GM would fund Opel rather than sell it to Magna. Now Germany is just letting Big Ed fulfill HIS boastful promise. Fat chance of that.

      He has to keep his hoard of government cash ($6.7 billion) to pretend to pay the taxpayers of North America back “early”. Perhaps you read Ed Niedermeyer’s editorial on this here on TTAC. It was good enough to get reprinted in the NYT.

      Other than that, I say:

      @trickydicky on Opel, +1.

  • avatar
    Tricky Dicky

    @FromBrazil – “Ouch, the world survived this crisis thanks to US largesse.”

    Huh? Call me mad, but where did the global liquidity crisis actually originate? Why the US, with the gov’t sponsored policy of banks giving huge mortgages to people without incomes or jobs. After that contagion was released and infected liquidity all over the world (lending is based on confidence, yes), every region was in deep doo-doo.
    So are you talking about US Largesse saving the auto industry then? Well, the Cash For Clunkers scheme was one of the last gov’t auto sales incentive programs to be devised and it was one of the shortest to run. It might have been a boost for the D3 + selected Asian OEMs but it was so far from “saving the world”. I would not be at all surprised if the Chinese subsidies to stoke that market had much bigger effect.

    @rmwill – Big Ed is not playing the German gov’t like a fiddle. He is in the process of having a piano dropped on his head from Berlin! From a German p.o.v. it’s better that a certain number of German employees are freed from the [supposed] tyrannical bad management that GM brings, than to have the entire German auto-industry pulled down by chronic overcapacity. Opel are the least German of all domestic brands and thus are the easiest to sacrifice. The public aren’t calling for them to be protected and the Unions are even lobbying against cash injections for Opel because they know it will only give the company the power to lay them off.

    This is all looking very bad for Opel. And what’s bad for Opel is going to be very bad for GM. Remember that Daewoo has a debt-to-equity ratio of 912% according to the Korean Development Bank – that’s a collosal amount of debt.

    • 0 avatar
      FromBrazil

      Hello Mr. Tricky Dicky

      I know, I know the crisis started in the US. But all I’m saying is that the US has kept its borders open and is still buying from all over the world. Now, and I’d wager some in the Administration have been toying w/ the idea, if the US decided to limit imports for a while, to benefit local manufacturers, it’d hurt people all over the world and supply some much needed (though some would say “artificially”) money into the system.

      Like in the 19th and 20th century (before the war), much of the US market was protected. And the US grew on that (like much Germany has always been, Japan and China still are), mainly at the expense of Britain. I don’t want to get into a whole theoretical battle here, but I wager that to take some hetherodox meausures in times of crisis, would (maybe) allow the US to recover much quicker than it is doing now.

      All I know is that imports in Brazil are barely brushing 15% and the drums have begun to sound…

    • 0 avatar

      FromBrazil: I can feel with you, import restrictions haven been very Brazilian.

      However, isolationism is not a good idea. According to their own CIA World Factbook, the USA is the world’s 3rd largest export nation, after China and Germany. The German number is a bit dubious, because most of it went to Europe. Of Germany’s total exports in 2008, 43 percent went to the eurozone, 63 percent to the European Union (which includes the eurozone), and 37 percent to the rest of the world. So surprise, surprise, the USA still is an export powerhouse. Want to bring the house down? Do what you suggest.

      If the USA closes its borders, say ta-ta to exports, because other markets will just retaliate. Furthermore, there are multitudes of things the USA simply don’t produce anymore. From Levis to Nikes, from golf clubs to washing machines, from toys to bicycles, all made elsewhere. You would have to close Apple and Wal-Mart. TTAC would be closed, because most microchips are produced elsewhere and nobody could afford computers.

      Closing the borders to imports would mean skyrocketing inflation (something you should be very well accustomed to, unless you are a Brazilian baby.)

      And finally, students of the Great Depression will tell you that closing the borders during a recession is the worst thing one can do.

    • 0 avatar
      FromBrazil

      Hello Mr. Schmitt!

      Well what I’m guess I’m saying is that hetherodox policies in times of trouble can sometimes help. And I agree w/ you totally Mr. Schmitt. If kept too long such hetheredox medicines tend to kill the patient.

      Also, what I want to point out is that the US is not as helpless or hapless as some think. They still have a very strong preponderence on what goes on. It’s not like 50 years ago that when the US caught a flu the rest of the world went into a coma, but when the US is sick, most of the rest of the world must at least pay a visit to the doctor. And if they had decided for extreme measures they’d’ve severely hurt everybody and maybe, just maybe, improved a little faster.

      But, again, I agree with you totally.

    • 0 avatar
      FromBrazil

      Hello again Mr. Schmitt!

      I’d just thought I’d add a little side note. I’m 38 yo so I lived through our hyper inflation period (how does 86% of inflation in a single month sound folks?). Oh the stories…

      Maybe one day you could do a little historical piece on Germany’s Weimar inflation and how it affected the car market. And I could tell you the story of how inflation helped Fiat finds its number one place in the market in Brazil. I believe that without hyperinflation Fiat would never have been (or would’ve take a lot longer!) number one.

    • 0 avatar

      I could regal you with some VW do Brazil stories from when you were a baby … like when VW had to invest a lot of money into huge farms and raise cattle to get the money out of the country … Or how, for a fee, the crane operator deposited a container on the other side of the customs fence in the port … or ….

    • 0 avatar
      FromBrazil

      Oh Mr. Schmitt please, please do!

      As many Braziliams say Brazil is just, “um país grande e bobo (a big and dumb country)”, but in an innocent way! If Kafka could have just visited this country…Oh the stories that could’ve inspired him.

      Bertel, may I call you Bertel?, please regal us all! It’d make for great reading into a world not really that familiar to most our esteemed B and Bs!!! It would be hilarious!

    • 0 avatar
      Cammy Corrigan

      Hate to be picky, but the word you’re both after is “regale”. “Regal” is what the Queen of the UK is. And what Buick are badging the Vauxhall Insignia.

      But I really want to hear these stories!

      Incidentally, I just had a look at the Fiat Brazil website. They announced a recall! What happened?

    • 0 avatar
      FromBrazil

      Yikes! Sorry! Thanks Miss Corrigan! ESL and all ya know?

      It seems to me that as a regular contributor to this site, you have some access to Mr. Schmitt. Please, impose on him the “need” for us to hear some of these stories!

      Thanks.

      BTW “impose on him” makes any sense in English? Or is it just my portuguese talking??

    • 0 avatar
      Cammy Corrigan

      I think what you mean to say is “Please, IMPRESS on him the need for us to hear some of these stories”.

      But I know what you mean! :O) One day, maybe my Portuguese will be that good!

    • 0 avatar
      FromBrazil

      Yikes! Again! Impress on him, not impose! Sorry for that, and thanks for the help. Much appreciated.

      As to the Recall I hadn’t heard of it. Went to the website and checked it out. Apparently, the side passengers in the back seat could buckle up the seat betls into the one that supposed to be for the central passenger. And their safety would be, of course, in danger. Though it took Fiat a very long time to respond to this as cars for a production run since the beginning of 2009 until cars made last month are subject to this recall.

      Let’s see, so for about 2500 cars per month for 18 months , that’d be about 45 000 cars involved. But at least they owned up to it. Toyota is still saying their cars in Brazil are in no way affected by the problems elsewhere…Hummmm…

  • avatar
    Gardiner Westbound

    The handwriting on the wall is saying goodbye.

    Our politicians chose to ignore it. North America still has at least one too many automakers.

  • avatar
    OldandSlow

    Call me Old, call me Slow or call me Old and Slow – but why would the German taxpayers want to bailout an American owned subsidiary with a bridge loan?

    Would the US Congress bailout Toyota or Nissan, if either manufacturer were run into the ground by their corporate owners?

  • avatar
    Buckshot

    Opel needs to die.
    Poor quality and very dull to drive.
    Building cheap cars in Germany is an oxymoron

  • avatar
    Tricky Dicky

    Buckshot – you are shooting from the hip there. Opel engineers would argue that they have on many occasions (by people stood on the left hand side of the Atlantic Ocean!) been asked to cut back on quality or to delay innovation in their products.

    Opel’s staff feel that they can compete with the best if they were given total responsibility for their product planning and execution. Nick Reilly’s recent rallying speech to the workforce was asking them to consider the positive aspects of being part of the GM family, not to improve their quality.

    Losing Opel would be a shame i think, but they are fast running out of people who love them and i think that all Ed Whiteacre managed to achieve was to unite people in hoping to see a Texan man eat his own words (“The German Chancellor dame can keep her euro-dollars ‘cos we’ll pay for our own darn rescue all on our ownsome!”) [my abbreviation]


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