By on May 5, 2009

In German politics or the corporate world, the secret weapon to destroy any progress is the feared “12 point program.” Any similarities to a 12-step program of substance abusers are purely coincidental. Since there is no way that all 12 points will ever be met, the project languishes and dies on its own with nobody having killed it.

The German government has increased the mega-tonnage of its secret weapon and presented Fiat’s Marchionne with a 14-point program as he visited Berlin on Monday to meet government and union officials. His intent: Secure political (and financial) backing by the end of this month for a dream. Marchionne wants to combine Fiat, Chrysler and Opel/Vauxhall to a car group that cranks out more than 7 million units a year and has combined revenues in excess of $100 billion. Second to Toyota. Bigger than Volkswagen. (That should make the plan popular in Germany.) Not so fast:

One of the many sticking points in the 14-point catalog, presented by Germany’s vice-chancellor Frank-Walter Steinmeier, is that the company must be headquartered in Deutschland, Financial Times reports. Germany didn’t forget that GM moved its European HQ to tax-friendly Switzerland.

And just in case Marchionne wants to move to beautiful Deutschland (Fiat said on Monday that a decision on a future headquarters for the merged group would be “premature”, but added: “Opel is a German company, so it needs a headquarters in Germany.”) there are 13 other conditions.

All Opel factories in Germany must be kept open, Der Spiegel writes, jobs must be kept in Germany. Anyone interested in Opel must prove “experience in the application of complex strategic concepts and the management of global companies.” Synergy and cost reduction measures must be shown. The company must prove that the money the government signs for is safe, that it is not siphoned off elsewhere, and, finally, the successful applicant must win a beauty contest with the unions and the Opel dealers being the jury.

Good luck.

Supposedly, the 14-point program applies to all applicants. Besides Fiat, there are the Canadian-Austrian car parts group Magna International, sovereign wealth funds from Abu Dhabi and Singapore, and three private equity groups.

The 14-step program should bring the list down to two, and it favors Magna. Both unions and dealers already gave their thumbs down to Fiat.

According to Financial Times, “Berlin has no say in which suitor will secure Opel, a decision that rests solely in the hands of General Motors. Yet the government has promised to support the future owner with credit guarantees and, as evidenced by the Steinmeier paper, is using its influence to shape the transaction.”

Marchionne in the meantime plays the cold war card saying, “Magna wants to take over Opel with Russian help. It would surprise me if the German government thinks that this is a good idea.” Someone from Russia will get back to Sergio on this and remind him that Fiat had consorted with the enemy in the 60s. Remember Lada? Togliatti anyone? Remember the hand crank?

A decision of who gets whom and what for how much will be rendered within a few weeks, says Automobilwoche [sub]. Economy minister Karl-Theodor zu Guttenberg says it could happen in May. And so it should. June 1 looms, the day of reckoning at GM.

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15 Comments on “Opel: Fiat, Magna And The 14 Steps To Heaven...”

  • avatar

    Magna might make a go of this. Frank Stronach has a track record of success. Even so if autos aren’t selling eventually something will need to give they are only delaying the day of reckonong.

    Only the strong should survive and when the goverment props up the weak they weaken the strong. The government helping out Chrysler is very bad for GM and Ford.

  • avatar

    Maybe the Japanese government should just go ahead and buy Mitsubishi and Mazda now to stay ahead of the curve. Why not? Everyone’s doing it!

  • avatar

    Why the Germans use 12 point plans to kill projects is new to me- as a German. Your own experience?
    Apart from that: if the US Government would have a detailed step list/requirement list as the Germans have for Opel, then the actions might at least come to some sense. Or is the US way of deciding how to help the US Automobile Industry preferble to having solid requirments before taxpayers money is spent?
    The unions like Magna (they hope for less job cuts) – but where are the synergies for and from Magna? And where have they shown ability to design new automobiles? They are a supplier!
    Fiat: looks funny. At least they might get the 7 mio cars per year – but without common parts and platforms that effectively brings nothing. Enough takeovers in the automotive industry have already failed due to this.
    However, if a standalone verson of Opel (e.g. with a PE Investor) is deemed not to be viable, then Fiat may be the only real industrial investor which may make sense.

  • avatar

    How many of those sales are theoretically coming from Chrysler?

    BS–up very late, or not in China?

  • avatar

    If Magna teams up with Opel they will lose their customers for their vehicle manufacturing contracts.Or does anyone believe Porsche will subcontract the Cayman and Boxster to “Opel”?.

    MAGNA just stated today that they only want to “help” and mentioned a 20% share- with the Russions being broke ,that`s not going to take them far.

  • avatar

    During a flood everybody tries to reach higher ground. Magna wants to grow beyond being just a supplier, because they fear losing customers in a world were there are fewer of those customers. They want to get closer to the “final customer” so as to become more secure. They think they know about being a car company by virtue of having built cars under contract for real car companies (the employee always thinks he knows his boss’s job!). They want to offer Opel a German-centered solution.

    The Unions like Magna because they hope (as also the government hopes) for a German-centered solution.

    Maybe Marchionne will throw the Germans a bone “Of course Opel needs a headquarters in Germany”. But in fact Fiat/Opel will be a pan-European company, maybe the first of its kind in the auto industry. That’s not a German-centered solution, but an expedient solution.

    It’s a solution that rationalizes production and products across Europe and indeed, the whole world. That means consolidation of Europe’s weakest players, merging of those product lines and closing of some plants, both in Italy and Germany.

    It’s the same story in the US. Only in the US there are no suppliers left who are strong enough to offer any solution.

    As far as the Germans are concerned, it will be better for them to concentrate on Volkswagen, the true German-centered solution. If this Fiat/Opel thing works, Volkswagen will have a problem on their hands (that statement puts a lot of faith in cooperation between the two companies and cultures). Let Opel go to the Italians or even the French or even let it die!. The likelihood of Opel surviving for very long is not high anyway.

  • avatar

    Headquarters in Germany? The Italians are going to let that happen? Opel may be HQ’d in Germany, but the group will always be in Torino.

    As for guarenting the plants – the Vauxhall plant in Luton UK is toast, followed next year by 1 or 2 of the German plants (after the elections in Germany, when the recession is over).

    BTW – what’s the name of the new company? Fiat-Opel-Chrysler …… FOC? I can just see Hans or Pierpaolo or Hank saying “I just me a new FOC today”. I can hardly wait…..

  • avatar

    The Italians are going to let that happen?

    But of course! They’ll have a headquarters in Germany. And a headquarters in Turin, for sure. And I suppose the UAW will want a headquarters in Auburn Hills. Give the people what they want!

    But where will the money be kept?

  • avatar

    I heard that FIAT wanted to close ALL of Opel’s German factories. And since we all know that they’re going to do it regardless of what they promise Angela Merkel, is she smart enough not to fall for a lie?

  • avatar

    This from the Italian News Service (AGI):

    If Fiat successfully closes the deal with Opel, none of the German manufacturer’s plants will be closed in its home nation, even if staff cuts will have to be made. The news comes from the Fiat managing director Sergio Marchionne, who has been in Berlin for the past few days to discuss the deal, and who gave an interview with the popular newspaper ”Bild”. ”We don’t want to close even one factory in Germany,” Marchionne explained, ”I need these plants to build a sufficient number of cars in the future. But, obviously, we will need to reduce the number of staff. No-one would be able to avoid this.” The top manager, who reassures that any state loans would be paid back within three years, did not supply figures of the possible reduction of staff. ”Opel will never be able to make profit at its current size, and if it doesn’t make profit, it won’t survive,” Marchionne said. ”I understand union leaders’ fears, but that is the reality.” The Fiat boss added that he would be ”surprised” if the German government gave preference to a competing offer from the Austrian-Canadian group Magna, which is trying to buy a European group ”with help from the Russians.” Marchionne went on, ”our plan is serious. We want to create a real European automobile group which is successful throughout the world: Fiat’s car department would fuse with Opel and Chrysler, and so we would become the second largest global group after Toyota.”

  • avatar

    Isn’t it ironic that not too long ago, GM had to pay Fiat billions in order to NOT take the Italians over?
    Now Fiat wants to get paid for taking over the remains of GM and Chrysler.

    Those guys in Torino are not that dumb…no matter what they do, they get the cash…

  • avatar

    Michael Karesh: In New Jersey for the week :)

  • avatar

    “But in fact Fiat/Opel will be a pan-European company…”

    Perhaps Marchionne should sell the deal by stating: “This merger will result in an Axis of Profit that will benefit all of the EU.”

    Er, maybe not.

  • avatar

    I wonder if that stretch Fiat was modified in Cuba, which is where the photo was taken.

  • avatar
    Martin Schwoerer

    OMG. Deripaska (an alleged criminal) together with Magna, or empire-building Marchionne? Both are lousy choices.

    And the German government is still pretending they can dictate the conditions of sale? “Good luck” is putting it exactly right.

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