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.”
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.”