By on September 6, 2012

Rubbing shoulders with industry types displaced to a Chinese city called Chengdu has its good parts. You hear stories you normally don’t see in a press release. An executive who works for the western partner of a large Chinese joint venture told me today that my story about Chinese interests killing the Opel deal between GM and PSA wasn’t true. At least not completely. As so often, in the denial was a much more interesting story. After another drink for encouragement, said executive told me very much off the record that GM is tired of the PSA deal and wants out. If that means leaving Opel for dead, so be it.

According to this executive,  GM feels it wasn’t told the whole story before it dumped  $423 million into PSA to buy 7 percent of the moribund company, and that PSA did not disclose the full extent of the troubles the French were in.

Also according to the executive, Steve Girsky recommends to call the PSA deal off, on grounds that PSA did not open the kimono wide enough.

As a matter of fact, says the executive and orders another one of what the Chinese in Chengdu may be drinking, Steve is pretty tired of the Opel and Europe mess.

If calling off the PSA deal pulls the last hose out of the German Opel patient, so be it. The PSA deal was praised as one of those “win-win” situations, where both could get rid of over-capacities and save much needed money.  Since 1999, GM’s European arm has lost $16 billion.

The line that Buick & China were against the platform sharing is a semi-truth, says the now very relaxed exec. Of course they were not happy. But their opposition was a convenient reason to call-off the platform sharing, which would kill the whole deal elegantly and without anyone having to raise a big stink.

Early August, it was reported that GM may have to write down the PSA investment if it won’t turn for the better.  On Monday, German media revealed that a deal between Opel and PSA that called for sharing of the Insignia platform was called off. Opel denied there ever was a deal.

Possibly, TTAC has become a target of the dreaded leaks. Who knows. I went to my hotel room to get some Chinese cash. Gotta go back to the bar.

PS: Meanwhile, Reuters reports from Detroit that “selling or otherwise divesting its money-losing Opel unit in Europe” is GM’s best option. That according to Morgan Stanley analyst Adam Jonas who sees no end in Opel’s losses, and that exiting Opel could be the best move. He doesn’t think GM would make any money selling Opel, quite the opposite. He figures it could cost GM up to $13 billion, money needed to convince a buyer to take the hot potato, and to fund Opel’s pension obligations. Says the analyst:

“One of the worst things in the auto industry is owning a cash-burning, resource-consuming business. We believe the time has come for GM to find a new home for Opel.”

The Detroit Free press quotes “experts, including lead analyst Adam Jonas,” who recommend a “separation” of GM and Opel. The Detroit News toots into the same horn.

GM spokesman Jim Cain denied that Opel is for sale, telling Reuters  that “despite the tough environment for the automotive business in Europe, we believe we have an opportunity to turn the Opel/Vauxhall business around and bring it back to long-term profitability.”

 

 

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23 Comments on “Deep Throat: GM-PSA Deal Doomed, Girsky Tired, Wants Home. Experts: Sell Opel Already!...”


  • avatar
    mike978

    Interesting stuff. If GM pulls out of the PSA deal as seems likely, why would this kill Opel off? Couldn`t they just continue with the plan to close Bochum and maybe one other plant in 2015. That would eliminate most (maybe all) of their overcapacity.

    • 0 avatar

      Maybe because losing money for 13 straight years would be regarded as a bad omen?

      • 0 avatar
        mike978

        I agree losing money for 13 years is bad. Hence the plan earlier this year to close one or two factories. Expensive to do but once done would, I assume, improve the bottom line going forward.

    • 0 avatar
      Dimwit

      Which one? Russelheim? And not every company is a Honda where any plant can make anything. It’s quite likely that GM has it that a platform is only built at particular plants. Closure means losing models. It would make sense why they’ve been so reluctant to move on it. PSA is probably the same way as well.

  • avatar
    ABankThatMakesCars

    What is it with GM? They will take a year or more to decide whether or not to do something that turns out to be a good idea. Then take 1 day to make a really bad decision they think is good and admit it was bad later.

    During bankruptcy, instead of firing salaried workers (and keeping contractors by the way) they should have stripped management from the middle on up and started over.

    Whenever I hear “a message from GM Leadership” I want to piss myself.

  • avatar

    The best stories are always at the bar!

    This is very interesting. Girsky has led the let’s-keep-Opel camp since Fritz tried to sell it off, which was weird considering the GM insiders wanted to sell while the Private Equity guys on the board wanted to keep it. I’ve assumed that if GM lifers wanted to sell a big, prestigious part of the company they must have had good reasons for doing so, given the parochial egotism the GM culture so famously fostered. If this story is true, it seems Girsky is finally coming around to their way of thinking… which means an architect of New Happy Shiny GM (and the likely next CEO) took years to catch up to the old dead-ender Fritz Henderson’s clear-eyed pragmatism, at least on the Opel issue. Not wildly confidence-inspiring if you ask me.

    Meanwhile, what’s the scenario for winding down Opel? Can they spin it off and put it into bankruptcy? Do they sell to a Chinese partner? Would the German government support a restructuring if GM were out of the picture?

    • 0 avatar

      Chinese partners were interested in taking over Opel when it was for sale, and I guess some would still be interested. Recall that the Dongfeng CEO today recommended to buy U.S. or American automakers.

      • 0 avatar
        TTACFanatic

        GM wouldn’t sell SAAB because they didn’t want the Chinese to get any of their “secrets” ; considering most of GM’s cars are Opel platformed I don’t see a sale of Opel anytime soon.

        Speaking of which, if Opel gets sold/goes under does that mean that the future of GM car platform development falls squarely on Daewoo?

      • 0 avatar
        28-Cars-Later

        “if Opel gets sold/goes under does that mean that the future of GM car platform development falls squarely on Daewoo?”

        *shudders*

  • avatar
    Lampredi

    @Bertel Schmitt:
    One issue, though – Saab’s last (that’s right, *last*) cars were based on Opel technology, and because of intellectual property concerns GM was (understandably) pretty adamant that it would block any deal that involved the Chinese as owners of Saab.

    But if GM were to sell Opel to the Chinese, wouldn’t it be putting itself in the very same situation that it tried to avoid by blocking the Chinese from owning Saab (only on a greater scale)?

    It would perhaps be better for GM just to shut down Opel outright.

    (Then again, in a decade or two GM is probably 100 % Chinese owned…)

  • avatar
    Robert Schwartz

    “GM feels it wasn’t told the whole story before it dumped $423 million into PSA to buy 7 percent of the moribund company, and that PSA did not disclose the full extent of the troubles the French were in.”

    Sorry, that kind of excuse should not be swallowed by a corporate board. For $423 million, you need to understand the seller as well as its own executives do. The line: “but they didn’t tell us” should be followed by: “you’re fired”.

    It is possible for a truly fraudulent business to fool even the most tenacious investigators as in the Refco fiasco. But from what I have read of PSA, its problems should have been obvious to any diligence team that knew the business.

  • avatar
    jpolicke

    So it took them 6 months to officially flush nearly half a billion dollars down the tube. Money that, if they really had it to blow, should have been used to repay the US taxpayers. And the 2 principal shareholders, namely the UAW & Us Treasury, are OK with this?

  • avatar
    gslippy

    Selling Opel means you must have a buyer for Opel.

    1. The Chinese aren’t that stupid.
    2. Who really needs the capacity?
    3. Who has the money?

    I’m not seeing it. This is going to play out in ugly fashion, just like Saab. It’s much easier to sell profitable businesses than losers.

  • avatar
    stars9texashockey

    Groundhog Day— Just not Fiat this time.

  • avatar
    Polar Bear

    When bad deals happen, like GM with Fiat and Peugeot, or Mercedes with Chrysler, I tell myself these clever CEOs must know something I don’t know about the dubious car makers they buy or invest in. They must have good reasons. And then it turns out they don’t.

  • avatar
    Acd

    $13 billion just to walk away–Ouch! Granted GM has that much cash available now but I’m sure they’d like to put it to a more productive use than to make a problem go away. It looks like there is no good way out of this mess.

  • avatar
    Pch101

    “An executive who works for the western partner of a large Chinese joint venture”

    Is that person close enough to Detroit management to really know what they’re thinking, or is he just speculating like the rest of us?

    “An executive who works for the western partner of a large Chinese joint venture”

    Back in March, it was Girsky who was doing all of the press interviews, talking up how good the PSA deal was.

    Whatever happens, I’m inclined to think that one motivation for GM to do the PSA deal was to prevent a competitor from doing it, instead. But I find it hard to believe that GM China can keep Opel from doing anything, since both of them are answerable to their masters in Detroit.

  • avatar
    GS650G

    So Joe Biden joyfully exclaims how bin Laden is dead and GM is alive while what’s left of the empire is slowly going up in flames. In death GM could have cut their losses three years ago and probably saved a total of 18 to 20 billion dollars.

    Somehow our tax money will find it’s way to Europe to pay off the Opel and PSA workers. In any event every dollar GM spends on this mess is less money for domestic operations, and ultimately getting the taxpayer out of this behemoth.

  • avatar
    TireIrony

    GM trying to make Opel work is like that guy at the end of the block trying to make that 91 Laser with the fried turbo and dead-raising speaker system “for sale $6,000″ work.

    Nobody cares how much you put into it, or what it was worth back in the day, or how it got you a date with that French chick. It ain’t worth spit now. And we told you she looked skeezy.

  • avatar
    Omnifan

    Jerry Lewis for president of France! Or GM?


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