By on November 8, 2009

Hell, no, we won’t go. Picture courtesy

When GM’s Fritz Henderson called Magna chief Siegfried Wolf and told him that GM had an irreversible case of seller’s remorse, Wolf’s flabbergasted counter was: “Are you joking?” Fritz told him he’s dead serious. Opel will stay with GM. Now, all Wolf has left for GM is unsolicited advice: Give more freedom to Opel and tread carefully with the brand and the unions. “GM must now smooth things out and win back trust. That requires a lot of sensitivity and tact,” Wolf told the German newspaper Bild am Sonntag (via Reuters).

It doesn’t look like GM will be heeding the advice. New Opel Chairman Bob Lutz and new GM-E chief Nick Reilly are known for the sensitivity and tact of a Sherman tank. Supposedly, both are here on a temporary basis only until new outside managers are found. It could be a long search, if it is a real one at all.

On Monday, Fitz Henderson will come to Germany and try to smooth over things with the workers, Opel’s worker’s council chief Klaus Franz told German media. It will be a tough talk.

“GM does not enjoy any credibility or faith in the eyes of the public or the (German) government, so they have to consider whether they now want to seek confrontation or cooperation by finding a common solution,” Franz told Reuters . “To see whether they are interested in cooperation, we need to know whether they are willing to start off where we last stopped — namely, the degree of autonomy and freedom that was set in the contract with Magna and accepted by General Motors.”

If that is a clear condition for any talks, as Franz said, then it will be a short discussion. True to form, Bob Lutz announced in the Swiss newspaper Sonntag that Opel will need to slash fixed costs at Opel by a third: “The restructuring plan developed at the end of last year is still the basis for a profitable business model. The plan foresees a 30 percent cut in structural costs.” Sounds like confrontation.

In the meantime, Germany is on a witch-hunt. Who was the fool that allowed GM to back out of the deal? According to Der Spiegel, it was Germany’s economy minister Karl-Theodor von und zu Guttenberg. Remember the big chain-letter brouhaha, started by EU competition commissar Neelie Kroes? As reported, Guttenberg had sent a letter to Henderson on 10/17/2009, asking for confirmation that there was no political pressure to do the Magna deal. Industry commissar Günther Verheugen had warned Guttenberg: Don’t write that letter, at simple declaration that there was no pressure would suffice. If the letter would be written, GM could revisit the decision to sell to Magna.

Guttenberg, who never had been enthusiastic to do the deal, wrote the letter nonetheless. He even added that government money would be available, “regardless of the identity of the investor.” This gave the GM BOD reasons to believe that Germany would hand them the money if GM itself would keep Opel. It wasn’t a coincidence that Henderson said the restructuring of Opel would cost €3B — exactly the amount Berlin was ready to drop on Magna, in addition to the exiting €1.5B bridge loan. Guttenberg is unconcerned. After the letter was out, von und zu received the defense ministry portfolio. He is in command of the German army now. If someone plays funny games, he’ll be looking into the Rheinstahl gun of a Leopard tank.

GM is trying to entice other countries for donations to the cause. However, any government money will not pass Brussel’s scrutiny if it comes with the conditions that plants will be kept open and workers won’t be fired. That, however, would be the only reason for any government spending any money. Financial help will also clash with public opinion. According to the latest polls, 70 percent of Germany are against subsidies for Opel. Martin Winterkorn, CEO of VW, agrees. With Opel gone, Volkswagen could sell 300,000 cars more.

With the unions set for war, with the EU and the population dead-set against financial life support, GM will have a rough road ahead. Stay tuned for more episodes of the never ending story.

By the way: German magazine Focus reports that GME chief Carl-Peter Forster, who handed in his resignation after attacking the board’s decision, has found a new job. He is now slated to take over as head of Indian group Tata Motors’ Jaguar Land Rover.

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9 Comments on “GM and Opel: The Winds of War...”

  • avatar

    So, GM backed out of the Magna-deal “in good faith”, believing they would set their teeth in the coffer of 3 billion euros any which way? So, what will happen when they find out there’s no way in hell they will recieve any european money if they are planning on closing plants and sacking people? Not even if they just wanted to preserve status quo prior to last year? I mean, how gullible do they think that the europeans are?

  • avatar

    Thanks for the story. Always good to hear about the Opel saga from a knowledgable source.

    Russian mobsters. GM reneging on a deal. Labor in turmoil. Political fighting. Bob Lutz going back to Europe.

    This story has more plot twists than a soap opera. It’s not hard to imagine a sad end to this story. Can anyone imagine a happy one?

  • avatar

    GM sent Lutz to Europe to patch things?

    What they really need is someone with tact – rather than a loose cannon rolling all over the deck kicking up more dust.

  • avatar

    No, what they need is a better poker player. And Lutz is definitively a better player than Forster.

    This sounds more and more like a big scam. They are going to blackmail Europe into paying up, or it’s adios muchachos. They are going to use Opel, the factories and the workforce as leverage. Pay, or else…

  • avatar
    John Horner

    If GM is a smart poker player they will simply drive a wedge between the German unions and those in all the rest of its European plants. See how long solidarity lasts then.

  • avatar

    Yeah, perhaps so. But we are talking about a German government paying up billions of dollars to have foreigners close plants and make Germans unemployed. If they have to pay for the unemployement benefits in the other end anyway, why pay the Americans to sack people at this end?

  • avatar

    Neelie Kroes made it absolutely clear that she won’t allow subsidies if they are conditional on keeping a plant open or workers employed. The only country that could keep up appearances was Germany – because most of the Opel plants and workers are in Germany. And because they had cut side deals with Spain, the UK, and possibly Poland and Austria. Any single country cutting a deal would be stopped by the EU.

  • avatar

    Looks as though Guttenburg will end up as the sacrificial lamb for the German government. Stupid move to write that letter to GM and to say loans would be available regardless of the identity of the investor. Dumb. Time to become an expert on growing houseplants during one’s lengthy retirement.

    GM has dug itself its own hole by trying to blackmail Germany, though. Mark my words, this is the end of Opel. One way or another, the German federal and state governments involved will work out a way to wriggle out of handing out money to GM. It just won’t happen. Politicians are great at re-explaining what they really meant.

    Forget about the unions, they’re a side show, unfortunately for their members.

    I agree with Ingvar, why pay money to GM to close plants and also pay for unemployment benefits and re-training of Opel workers? Paying once will be quite enough of a burden. The German government will look after its own people and to hell with GM.

    And that bridge money remaining, some $800 million Euros, is still due by the end of this month. If GM doesn’t fork that over, the German equivalent of the bailiffs will move in and take the plants as payment instead, or as part payment only, really rubbing the General’s nose in it by leaving an outstanding bill. I’d like to watch Fritz’s little mustache twitch when that happens.

    Opel IP and plants? Gone, just because those losers at GM thought they were so damn smart. You can’t beat City Hall, and especially not a pissed-off one.

    GM’s reputation in Europe will disappear instantly, and the delusional suits from Detroit, who somehow think that Europe will suck up a million dickwad Daewoo “Chevrolets” a year by 2014 will grouse about “furriners’ as they play golf in Grosse Pointe, still monumentally wasting your tax money and mine in an endless game of charades.

  • avatar

    I am not sure how GM was black mailing Germany.   Germany was trying to force the buyer on GM.  GM has the money for the 800 Million Euros, so that isn’t a problem.  I think Germany is so messed up right now with this.  The restructuring was going to happen no matter who took over.
    What is likely to happen…
    GM will talk to several countries and unions talking about what the plans are going forward.  There will be negotiations.  Some plants will close.  If Germany plays too much hardball, the plants there will close.  GM has too much production anyway in Europe.  The question is, which countries will work with GM on this?  Those will be the ones who keep jobs.

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