Opel Watch: RHJ To Do the Whacking?

Bertel Schmitt
by Bertel Schmitt

A few weeks ago, we cited Canada’s Globe and Mail, which wrote with great insight: “It’s entirely possible the Magna bid is in serious trouble. Indeed, the obstacles-political, economic, financial and industrial-are formidable and the negotiations are just starting . . . . Let’s just say that Magna’s bid for Opel is shaping up to be the most complicated auto deal of the year.”

That was quite an understatement.

For a while, the Magna deal sounded as good as done, except for a long list of unresolved issues, each explosive enough to blow the most solid deal. Then, new bidders were invited back. China’s BAIC made an attractive offer. The EU had a word to say. The Opel topic split the ruling coalition in Berlin that is engaged in bitter electioneering. In the meantime, GM, emboldened by its wash-and-rinse exit from bankruptcy, is getting more assertive and greedy.

Reuters now reports that “managers at GM may be hoping the U.S. Treasury—its largest shareholder—would back plans to sell a stake to RHJ, instead of to Magna.”

Moribund RHJ (their annual loss doubled last year to €1B), for long thought to be out of the game, handed in a new proposal. RHJ is reported to require €3.8B in (German) state aid as part of a deal for a majority stake in Opel, against an expected request of €4.5B from Magna. China‘s BAIC has asked for only €2.64B in aid.

The possible plan: The Belgian-based group could do the dirty work, find excuses to close surplus assembly plants and fire the workers, collect money from any government that wants to keep plants open. Then, RHJ will sell back its stake in Opel to GM. The reinvented company “wouldn’t have to get its hands dirty with measures it would have found politically difficult or impossible to implement itself,” as Reuters puts it.

The German unions share the same queasy feelings: “The suspicion is that RHJ as a financial investor would act the interest in GM and quickly flip it back to them,” said Armin Schild, a union leader who sits on Opel’s board.

GM may be emboldened, but they also may misread the political cues from Germany. The German government holds the majority of Opel in trust, in exchange for €1.5B bridge financing. Their biggest fear is that any state aid will flow back to Detroit. The pre-election political climate in Germany has turned anti-bailout.

On a national level, politicians from both sides go slow. The elections will most likely be decided by retired people who worry more about their pensions than about keeping factories open. The haggling between bidders gives Berlin time to do nothing. All other carmakers in Europe and their governments wouldn’t shed tears over Opel’s departure.

Worldwide production capacity is currently estimated at 90 million units per year. Only approximately 50 million units are currently sold. As much as governments may prop up their national auto industries for political reasons, ugly reality calls for closing down plants.

Only two months until the national elections in Germany. When they are over, and no deal is closed, Opel will be closed also.

Bertel Schmitt
Bertel Schmitt

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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  • Kwik_Shift_Pro4X The push for EV's is part of the increase in our premiums. Any damage near the battery pack and the car is a total loss.
  • Geozinger Up until recently this was on my short list of cars to replace my old car. However, it didn't pass the "knee test" with my wife as her bad knee makes it difficult for her to get in and out of a sedan. I saw a number of videos about the car and it seems like the real deal as a sporting sedan. In addition I like the low price, too, but it was bad luck/timing that we didn't get to pull the trigger on this one.
  • ToolGuy I agree with everyone here. Of course there are exceptions to what I just said, don't take everything so literally. The important thing is that I weighed in with my opinion, which is helping to move things forward. I believe we can all agree that I make an important contribution (some will differ, that is their prerogative). A stitch in time saves nine. Life isn't fair, you know. I have more to say but will continue at our next meeting. You can count on that, for I am a man of my word. We will make it happen. There might be challenges. I mean, it is what it is. This too shall pass. All we can do is all we can do. These meetings are never really long enough for me to completely express all the greatness within me, are they? Let's meet to discuss. All in a day's work. After all, Rome wasn't built in a day. At the end of the day, I must say I agree with you. I think you will agree. When all is said and done, there is more said than done. But of course that is just one man's opinion. You are free to disagree. As I like to say...(I am working on my middle management skills -- how am I doing?)
  • Golden2husky Have to say he did an excellent job on the C7, especially considering the limited budget he was given. I am very happy with my purchase.
  • Marty The problem isn't range; it's lack of electricity in multi-unit building parking. All you need is level 1 - a standard 120v wall socket - and if you're plugged in 10 hours overnight you get 280 miles per week or more. That's enough for most folks but you can use public charging to supplement when needed. Installing conduit circuits and outlets is simple and cheap; no charge stations needed.
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