Reaction To Reilly's Restructuring Plan For Opel: It Sucks
Here are the first reactions to Nick Reilly’s turn-around and begging plan for Opel. In one word: “Booooh!”
Roland Koch, Premier of Hesse, where Opel has its headquarters, where most of Opel’s jobs and countless suppliers are, should be most interested in the survival. What was his reaction? “According to our first assessment, it will be necessary that GM as the owner will increase its contribution considerably,” he said to Das Autohaus. Translation: “Put money on the table. Then we talk.”
Little know factoid: In 2008, Opel was the 7th largest employer in Hesse, followed by Volkswagen, only 2,800 jobs behind Opel, most in a parts factory and distribution center in structurally weak Kassel. When Opel has finished its reduction in force plan, VW will provide more jobs to the state than Opel. Koch knows which side his bread is buttered.
The unions, which should be most interested in preserving jobs, immediately shot down the plan.
If there is no agreement between management and unions, there will be no government money. Said Kurt Beck, Premier of Rhineland Palatinate, where Opel has a plant in Kaiserslautern: “There must be agreement between the workers and management.” Otherwise, no government money.
Peace with the unions is just as remote as more money from parent GM. Forget about any Detroit dollars, says Reilly: “Opel is a European company.” (Are you sure, Nick? Ask Whitacre.) “GM needs its money to repay the loans of the Canadian and U.S. governments.”
Even on the outside chance that peace breaks out between Reilly and the unions, and that Detroit sends a big check to Rüsselsheim, government support needs to overcome nasty regulatory hurdles. The Opel money would have to come from the so-called “Deutschlandfonds,” a fund created to rescue companies that became a victim of the recent recession. Die Welt names the two essential criteria: A valid business plan. And the company must have been viable before July 2008. Ouch on both counts. Says the Süddeutsche Zeitung: “Experts doubt that Opel meets the criteria.”
Finally, any government aid must pass the scrutiny of Brussels. The EU will be on the lookout for any jobs-for-aid deals. And why give aid if it doesn’t save jobs?
Also, Europe has bigger problems than saving a damsel in distress that had refused to be saved before. All eyes are on Greece and how it could blow the Euro to smithereens. Once Greece is taken care of, attention will shift to what is called the “Club Med” of EU countries, Spain, Italy, Portugal that are facing financial meltdown. Opel has turned into a simple distraction.
Some hints to the commentariat: GM doesn’t have to take all the intellectual property out of Opel and move it elsewhere. Already done. Opel’s IP has been sold to a General Motors company, conveniently located in Delaware. Opel and any other GM companies pay license fees for their use. A common tax dodge, used to run up costs and to expatriate money without paying taxes in a high tax country such as Germany. Stripping Opel of assets and then taking Opel BK? Dangerous if done in Germany. You can go to jail for it.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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This is an example of being caught between a rock and a hard place. GM needs Opel to develop the smaller cars for GM's American operations, which is why GM decided it couldn't sell off Opel, but GM has no money and can't afford to invest enough out of its own pocket to save Opel. Meanwhile, Germany and the U.S. have very different operating modes vis a vis manufacturing management/labor cooperation. Germany prioritizes retention of manufacturing jobs, whereas the U.S. lets them leave the country. American business has an adversarial relationship with labor, whereas in Germany the two work together in partnership. It's culture clash and the realities of the world's first Great Recession. Best to leave one's options open and not take hard positions that will be regretted later.
If everything is licensed, I am betting the licenses aren't transferable with sale. Kind of like how you can't legally sell the license that came with your Windows XP cd. If this is the case, I could see Opel going down. The unions don't seem to want to work with Opel on this. Opel needs concessions and job cuts. While it is a hard pill for the unions to swallow, this is what needs to happen. I also don't think the size of VW is going to matter here. If the jobs are lost, they aren't likely coming back. The white collar jobs will be gone. The blue collar jobs will likely show up in places like Turkey. If I was VW, and needed to increase production because Opel is going under, I am not expanding production in the high dollar labor markets.