Positive Post of the Day: GM Gets to Keep Opel Edition

Edward Niedermeyer
by Edward Niedermeyer

Clear-sighted auto industry analysts tell Automotive News [sub] that “Just a few months ago, GM was not in a position to retain Opel.” But now, according to these wise seers, GM doesn’t have to sweat the recovery of its embattled European division. “They were fighting on life support. Now the patient has recovered,” is the verdict. Huzzah! For lo, GM hath looked unto the hills from whence cometh its help, and it figures more just might be on its way. “I think the last year has shown that the government can be very creative when it wants to be in how it structures these deals,” says another analyst, who suggests that “private investors with possible credit support from government sources” could ride to Opels rescue on behalf of GM. After all, if anything, Opel is the bailout that got away. “There really wasn’t a view articulated (on Opel). It was one of several challenges that GM faced,” says an anonymous U.S. official “In its restructuring, there really wasn’t a particular view on a specific path.” And the door is still open for a taxpayer-backed rescue of Opel.

The WSJ reports that Opel has enough cash to keep it hanging around until the year’s end, taking pressure off the rush to find Opel a well-funded home. Accordingly, German Chancellor Angela Merkel is backing off her push for a quick sale to Magna/GAZ/SberBank. Merkel now wants resolution by GM’s September 8/9 board meeting, saying she doesn’t believe there’s a need to involve US President Barack Obama in the negotiations. “Content must come before speed,” Merkel tells Bloomberg. “Issues are still emerging that we will clear up with GM representatives thoroughly and calmly.”

Helping to take pressure off the deal is news that automakers are moving to cut supply chain ties with Magna in case the Austro-Canadian supplier does win the Opel deal. According to the WSJ, Magna promises a “firewall” between its supplier technologies and Opel, but that’s not enough to stop firms like VW from worrying. But reminding Magna of the downsides of buying a real automaker helps GM’s chances of holding onto its rogue division. But the issue of cash is still on Magna’s side, since GM has yet to secure funding for its Opel rescue.

Another challenge to GM’s European recovery is the re-emergence of a Fiat bid for Opel. La Reppublica (via the WSJ) reports that Fiat is “ready to reconsider renewing its previous bid” for Opel, in case GM doesn’t accept the Magna bid. “Given how we are totally immersed in Chrysler, we have repeated several times that our offer for Opel remains on the table. With only one condition: we cannot nor do we want to change it,” says Fiat Chairman Luca DeMontezemolo. Too bad Fiat is drowning in debt, which means that the Germans would have to financially back a less-palatable deal to avoid a Magna tie-up. Which, in theory, improves GM’s chances of coming away with its Opel intellectual property. At least it does if you look at it positively enough.

Edward Niedermeyer
Edward Niedermeyer

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  • Bertel Schmitt Bertel Schmitt on Aug 27, 2009

    HPE: Fiat said they are still interested, but "under the old conditions." The old conditions were no money down. They don't have any. Maybe the Germany were leading up to Fiat when they mentioned RHJ and “an international partner from the car industry” (if its true ....) I don't think it's going to happen.

  • Tricky Dicky Tricky Dicky on Aug 28, 2009

    Bertel - thanks as ever for your lucid comments and also for the admission of a struggle to keep track of the twists and turns in this sad story. I've been having a terrible time to make sense of it. It seems that many big German companies are waiting for the day after the elections, to announce big job cuts (without jeopardizing a CDU election victory). I can see GM finding some way to get a wodge of cash to do something with Opel. I suspect they may try and drive a wedge between German, Spanish, UK and Belgian governments, trading off job security. I wouldn't expect US management to care too much about the underlying principles of the European single market. GM will get to retain their small-medium car platform development expertise in Russelsheim, a bunch of German blue collar people will be left to find another job, the whole of Europe will be at each other's throats over unfair competition between nation states. And Russia will fall back on Energy Terrorism in a desperate bid to increase oil prices/ wealth extraction from W.Europe. So what's to get anxious about?!

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