Opel’s Nick Reilly is casting worried glances towards Berlin and Brussels. What he hears from there makes him double his Maalox dosage. Or pop some local Rennies, if the heartburn meds are in short supply at the Apotheke in Rüsselsheim. Which they undoubtedly are. Nobody wants to help Reilly. Berlin doesn’t want to. Brussels doesn’t want to. Even Opel’s own auditors are no help. This tale would be better told by Kafka. He’s dead. I’ll try.
Brussels used to be famous for its elaborate lace. Now, mass production of red tape has replaced the intricate textile. As you may recall, Nick Reilly circulated its alleged turn-around plan for Opel amongst European governments, with the intent to shake loose €2.7b in charitable donations. Reilly needs the money for Opel to survive. GM’s cupboard is bare.
On receipt of the plan, Germany’s Economics Minister Rainer Brüderle sent the document to Brussels, along with a request to “to examine critically whether the business plan is viable and whether competitive distortions in Europe can be excluded.” Other EU countries, such as Belgium, also asked the EU for an opinion. After all, it had been agreed that none of the EU states would act alone, and only after the EU Commission had vetted the plan.
Just in case Brussels wouldn’t find the time to study the plan, Brüderle supplied his executive summary: He has serious doubts about Opel’s restructuring plan. “The viability is questionable,” said a memo by Brüderle’s men.
A week after the files had been submitted to EU Central, the commissars replied. They said, sorry, the EU had already rendered an opinion on Opel, the new plans are not worthy of another assessment, no opinion will be forthcoming. This according to a report by Germany’s Rheinische Post.
Reilly’s plan is now stuck in a black hole somewhere between Brussels and Berlin. According to the German edition of the Financial Times, Berlin insists on a blessing from Brussels, but Brussels doesn’t want to touch the devilish documents. Berlin doesn’t want to get burned either and kicks the files right back to Brussels: “We insist that we find a solution which is based on a European examination” said Brüderle’s State Secretary Jochen Homann. Having made his point, Homann showered Brussels with probably not highly sincere praise: “We admire the wisdom of the commission, which was able to render an opinion after reading a short summary. We aren’t there yet.“
In Brussels, the commissars in charge of the matter have changed. Günter Verheugen and Neelie Kroes have finished their stint in Brussels. Ten days ago, they have been replaced by Antonio Tajani and Joaquín Almunia. Maybe, the freshly minted commissars from Italy and Spain are still learning the ropes. Or they are cognizant of the fact that the EU has other problems. Greece needs to be bailed out to the tune of €20b to €25b. Portugal, Italy, Ireland, and Spain could be next. Nobody has the bandwidth for Opel’s quandary.
For those who don’t want to help Opel, the situation couldn’t be more wunderbar: By mutual agreement, help for Opel needs Brussel’s placet, Brussel says there will be neither a yes nor a no, so any help for Opel is verboten. Sorry!
Devoid of an opinion from Brussels (on which he nonetheless insists, appearances must be kept) Brüderle ordered his officials to enlist the services of PricewaterhouseCoopers, says the FT. PricewaterhouseCoopers should audit the plan. It’s pretty much a symbolic act to buy time and rear-end coverage.
The first thing PWC will note is that Opel’s own auditors are not so sure whether the plan has merit. It could be the usual weasel-worded disclaimers, caveats and qualifications auditors like to insert into any opinion. However, the German magazine Focus says that Warth & Klein, the auditors enlisted by Opel to shore up their plan, found “numerous weak points” and “additional risks for the tax payer” in Opel’s restructuring concept. Opel’s own auditors aren’t so sure whether Opel qualifies for government money. They say the problems at Opel „were not only temporarily caused by the current economic crisis, but also by a technological deficit” in comparison to the competition. By Warth & Klein’s own assessment, Opel “has in the past demonstrated a limited disposition towards investments and innovations, caused by the corporate crisis at GM.“
Translation: Opel is not a victim of carmageddon. Opel’s lifeblood has been sucked out by Detroit vampires. With CPAs like these, who needs money from Berlin.
This is a neck-breaker. Money from the “Deutschland Fonds” is only available to innocent companies who became an unwitting victim of the market malaise. If they brought it upon themselves – sorry, please go and die, and don’t make a mess of it.
What’s worse, Opel’s own auditors warn that even with a governmental cash injection, Opel may run out of money by end of 2013, and that the money paid by Germany could seep through the borders and vanish abroad.
This confirms the German government’s worst nightmares, and it is all Brüderle wanted to hear. If Opel’s own CPAs, and by submitting the document, Opel itself, doubt the future, what are the guesses that PWC will come to the conclusion that all is rosy in Rüsselsheim?
After Price Waterhouse has taken the time and money necessary to come to their appraisal, it will read like this: “Based on the information provided by management, the Due Diligence Team at PricewaterhouseCoopers AG has come to the conclusion that Opel is done and should be disposed of in an environmentally responsible fashion.” Or more diplomatic words to that effect.
Opel has turned into the European tar baby, and nobody wants to get stuck with them in the brier patch between Brussels and Berlin.
Last Friday, Industry Commissar Antonio Tajani called a meeting of all 27 of Europe’s economy ministers in Brussels to discuss the future of the European auto industry. There was a lot of talk about over-capacities and sinking demand. “We need a coordinated approach on a European level to arrive at a sustainable recovery,” said Tajani after the meeting. Opel wasn’t mentioned. Tajani is a confidante of Italy’s Berlusconi. Italy’s Fiat would miss Opel just as much as Germany’s Volkswagen would miss Opel.