By on November 6, 2009

What happened two days after GM blindsided most of Europe, including Russia, with their decision not to sell Opel after all? As announced the next day, Opel workers in Germany laid down their tools today. Tomorrow, workers in Opel plants in the rest of Europe will follow.

Yesterday night, German Chancellor Angela Merkel picked up the phone, called her colleague Barak Obama and voiced her displeasure. “Obama said he had not been involved in the surprise decision by the GM board,” Reuters reports. Isn’t Teflon wonderful? Angela told Barak that his state-owned company better pay back the balance of the bridge loan by the end of the month. She even dispatched her very own collection agent to DC.

Today, Germany’s newly minted foreign minister Guido Westerwelle went to Washington to visit his colleague Hillary Clinton. According to Deutsche Welle, Westerwelle made clear that the loan “must be paid back.” He said that Clinton had shown “understanding for our position.”

In related news, Fritz Henderson told reporters today that GM is busy raiding all available couches, and that he is confident that GM can find the €3b needed to keep Opel alive.

“We will be very shortly presenting our plan,” Henderson said. “We feel confident that the plan will be financeable.” Looks like GM’s Carl-Peter Forster was right when he said yesterday that GM’s board doesn’t have a plan.

GM “is certainly planning to ask European governments for state aid, to help restructure Opel and Vauxhall, “ says the BBC. “But after the collapse of the Magna deal, Germany is in no mood to pay.” Good luck with the couch.

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34 Comments on “Opel: Germany Definitely Wants Its Money Back...”


  • avatar
    gimmeamanual

    Can you give some explanation of what the workers are striking about? Do they think that by keeping Opel, GM is putting their jobs at a bigger risk than a sale to Magna would? It’s just not clear to me.

  • avatar
    carguy

    GM is still making its own business plans and decisions despite Government assistance or part ownership (something that the Germans should be very familiar with). To suggest that the president was somehow part of this decision not to sell Opel is way over dramatizing the situation.

  • avatar
    pista

    Doesn’t Barak have a c in it?

  • avatar

    @ Carguy: Nobody in Germany or Europe honestly believes that nobody in the administration had a clue. Officially, it has been decided that the administration was indeed clueless, and the matter is officially settled.

  • avatar
    97escort

    How is it that with government ownership of 60% of GM that it can make major decisions that impact the government without even telling the administration? I have to side with the Europeans. Obama knew or should have known. And if GM management did not inform the administration, it it incompetent. No surprise there.

    Otherwise we have a situation where feckless GM management can spread havoc not only in mismanaging GM but also in making stupid decisions that harm the government.

    It appears that the Obama administration has indeed created a monster. With majority ownership comes control or else the minority owners/hired help are running amok putting the governments majority interest at unnecessary risk.

    This is a common flaw of American capitalism/socialism. The real owners do not take responsibility for running the outfits they own and the hired help goes out of control with such things as big pay, bonuses or ego tripping management decisions since their own money is not at risk.

    If the government owns it, it is responsible for running it. Europeans being more socialist than the U.S. are more experienced in this than we are.

  • avatar
    cthill

    Get over it already. It is not like GM wanted to sell Opel before but it did not have any choice the German government was escorting it to the wedding with a shot gun at its back.

    Is a surprise to any one that GM backed out the first chance it got.

    The unions wanted the deal to go through because they thought it would result in fewer job losses and because of economic nationalism.

    Many in management wanted it to go through because of economic nationalism and they could run the company without those meddling Americans.

    Many at Opel are probably also still bitter about Opel being replaced as the global GM brand by Chevrolet.

    A far less emotion laden article on the situation can be found
    http://www.economist.com/businessfinance/displayStory.cfm?story_id=14792356&source=features_box2

  • avatar
    Tricky Dicky

    Two mistakes as I see it:

    1) American mistake: back in June, when the PTFAO didn’t earmark Opel as one of the essential strategic assets that were needed for GM to survive. Myopic focus on American product & plants, not on a global evolving business.

    2) German mistake: from Day 1 when Franz Klaus (Union leader on Opel Works Council) started to rail against Fiat ownership, encouraged by the state Premiers from the 4 places where Opel has German plants. The mistake was to only see one partner through rose-tinted glasses (Magna) and to put the preservation of jobs as the ultimate priority, with an arrogant belief that they could impose this requirement on all other stakeholders.

    Books will be written about this episode. Maybe something catchy like, “When Angela met Vladimir”. As an aside, neither the Russian, British or Spanish governments are complaining very much. Wonder why (not)?

  • avatar
    pgcooldad

    I was following the story along very intently until I got to the part where “Guido Westerwelle went to Washington to visit his colleague”, than I lost it. What! What German names their son Guido?
    Merkel – “Oh yeah, GM whanna not sell the Opel? Ok, we senda Guido to America to get our Deutche Marco backa.
    Being if Italian descent, I found to be very amusing. Sorry for going of topic.

  • avatar
    Tricky Dicky

    pgcooldad – I think in Italian, the name is pronounced “Gwee-dooh”. In German and Dutch (where it is not uncommon, if a bit old fashioned now), the name is pronounced “Gee-dooh”. Like the French pronunciation of ‘Guy’ if that helps ;-)

    Anyway, is it more or less embarassing than the name of the last German Economics minister, Herr Count von en zu Guttenberg, or however Bertel likes to suck up to him…. ?

  • avatar
    Stingray

    Nobody in Germany or Europe honestly believes that nobody in the administration had a clue.

    Of course is BS. But forms have to be kept, asses need to be covered…

    And of course German government will want their money back now. I don’t know if they’re going to be like the one down here, in which they’re going to start pursuing/auditing/checking the heck out of them because of this.

  • avatar
    PeteMoran

    Just thinking out aloud, is there a FORX issue for GM as well here? EURO/US wise, I mean.

  • avatar
    Slocum

    Obama knew or should have known.

    More than that, Obama not only must have known, but must have given at least his tacit approval. (The alternative is the administration is completely clueless and incompetent). Which means that meeting with Merkel and sending her on her merry way without a hint of what was coming down was seriously obnoxious, and she has every reason to see it that way. Remember back when Obama meant the Europeans were all going to love us ;)

    American mistake: back in June, when the PTFAO didn’t earmark Opel as one of the essential strategic assets that were needed for GM to survive.

    Well, or maybe the PTFAO didn’t think that, politically, it would have flown at that time to send U.S. tax dollars to save Opel. But now the judgement may be that they can get away with it. Especially if it looks like a decision taken only by GM’s board and not the administration. But if there’s a huge uproar, Obama can always save the day by having his czar veto the board’s ‘reckless, unapproved action’. Ain’t politics beautiful?

  • avatar
    mitchim

    Great story Bertel. Can’t wait to hear the Canadian response to this.

    Just guessing here but I am thinking that GM must have an ace up there sleeve. Who ever decided that trying to keep Opel knows that it will result in many problems. They better have calculated for all problems that could arise:

    Loan repayment now! Wow
    and Strikes!

    Good luck GM. What ever there plans and provisions are for keeping there Opel jem is going to be good. If the money comes from the feds again… Meh a juicy story got boring.

  • avatar
    MikeInCanada

    GM knows all too well that politicians are full of hot air when they start posing as being responsible with other peoples monies.

    Germany says, ‘We want our loans paid back’ and GM’s reply will be ‘Sure, we’ll cut you a check and have some of the newly laid off union workers drop it off at your office…’

    The German government’s inevitable reply will be ‘Go ahead and keep the money and the workers for a little longer…’

  • avatar
    John Horner

    GM never should have considered selling off Opel in the first place, so I see this as a late realization that there was still time to make a mid course correction. Didn’t Germany just write a letter to the EU saying that they money they planned to make available to Magna would be available to anyone in a position to operate Opel?

    Let the German government moan and groan all they want. Perhaps the US can find the cash by simply winding down Ramstein.

  • avatar
    Robert Schwartz

    I Pray that BO does not know or worry about GM and Opel. He has to make up his mind about Afghanistan and Pakistan, which is a hot shooting war, first.

    And, the laws that govern corporations commit their management to their directors. Shareholders have no right to participate in corporate management, other than by the election of directors, nor are shareholders responsible for the payment of corporate debts in the absence of an explicit written guarantee. The correct answer to Chan. Merkel is: “That is very interesting. The United States is only a shareholder in GM, and it has not guaranteed GM’s debts. I hope GM does pay its obligations when due. I shall forward your concerns to Chairman Whitacre.”

  • avatar
    dougjp

    Looks good on GM. Additionally to what’s mentioned in the article, try doing business in Russia anytime soon. The Board of Bystanders are an even worse group now than before. If that’s possible. I hope it means Chapter 7 as they deserve it ten times over.

  • avatar
    Buckshot

    People fighting over Opel?
    Amazing.
    Opel cars were budget cars, before the japanese and koreans came along.
    Nowadays they are trying to be more upscale, but they don´t have the cars for that.

  • avatar
    tom

    Wow, now GM really put their ace on the table:
    Bob Lutz will become chairman of the Opel supervisory council…I guess GM has given up…

    On the Obama issue: For his own sake, he better continues to play the innocent bystander, because otherwise things could get messy…like Germany saying: “Give us Opel or we’ll retreat our troops from Afghanistan today”…that’s what you get when you mix business with politics…

  • avatar
    Steven02

    I am not sure why anyone was really surprised by this. GM saying they are going to wait for the board to meet to decide if they want to sell Opel… please, you have to think there is a reason why they were waiting.

    The workers are so very dumb for thinking their jobs were going to get saved. The strike really doesn’t mean anything. So, they strike, and then Opel has to close its door b/c no one else will buy, then their jobs will be lost.

    Edit: I also think GM has a plan for Opel. I don’t think it would have passed the new board if they didn’t.

  • avatar
    Daanii2

    The laws that govern corporations commit their management to their directors.

    That’s true. But Barack Obama has already broken that law. His presidential task force fired Rick Wagoner. With no authority under corporate governance law to do that.

    Not only that, GM’s bankruptcy was stage-managed by the federal government. Again, without authority under the law.

    Hard now for Obama to say, as Robert Schwartz suggests he should, that Germany should look to GM for repayment of its money.

  • avatar
    wsn

    Why not just liquidate Opel’s hardware and fire every worker there? Give whatever that liquidation brings in to the German government and call it a day.

    As for Opel’s IP, I will be surprised if it’s not already on a hard disk somewhere in the U.S. Ask B.O. for more tooling loan and build needed hardware in GM plants that’s to be phased out. That way, Americans at least get the good side of socialism (in addition to the bad side that they get no matter what).

  • avatar
    John Horner

    “That’s true. But Barack Obama has already broken that law. His presidential task force fired Rick Wagoner. With no authority under corporate governance law to do that.”

    Nonsense. The US provided the debtor in possession for refinancing GM in order to get it out of bankruptcy. The financier can demand any conditions they like in such a situation. For example, many years ago, Dupont money rescued GM when it was at death’s door. One of Dupont’s conditions was the firing of founder William Durant.

    You might argue that firing Wagoner was stupid, but there was nothing illegal about it.

  • avatar
    Pch101

    His presidential task force fired Rick Wagoner. With no authority under corporate governance law to do that.

    You continue to make this comment, even though you are factually wrong.

    You missed the point that the federal government is the 60% equity holder. It therefore controls the board. http://www.nytimes.com/2009/07/24/business/24auto.html

    No laws were broken. If you can cite a statute that was violated, do so in your reply.

  • avatar
    Daanii2

    The federal government owned 60% of GM when Steve Rattner fired Rick Wagoner?

  • avatar
    ChristyGarwood

    Quotes from Fritz and the link to the source.

    http://media.gm.com/content/media/us/en/news/news_detail.brand_gm.html/content/Pages/news/us/en/2009/Nov/1105_Fritz_Transcript

    “… If the money does not come from Germany or the other countries, what options do you have?

    Second issue is, obviously, we will pay back the bridge loan which is due in the end of November. (Current liquidity in Europe) is sufficient to allow us to do that. The company is upgraded while certainly a challenging environment for us. (We’ve) operated at or better than planned. So we have the resources there to basically pay off the bridge loan and… resubmit for consideration not only in Germany but in various other countries (that) indicated an interest in providing resources and support. … In terms of our expectation… we are (at) about $3 billion Euro of financing. (That’s) number one. Number two, (we’re ) presenting the plan first to our people, including all of our people, labor as well as involving the entire workforce, then sitting down with the respective governments. We feel confident that the plan will be financeable without any doubt. Q: Financeable by the government? Or other sources?

    Fritz Henderson: Part of it is from us.”

    And I quote Pch101 “You missed the point that the federal government is the 60% equity holder. It therefore controls the board.”

    In my GM employee opinion, the feds control GM’s board, and the board decided to keep Opel, so it follows the feds knew about this. Just because the Germnan government thinks the US government is clueless doesn’t make it so.

  • avatar
    Extra Credit

    This is exciting news! With GM firmly in control of Opel, the revival of Saturn can’t be far behind. Change is good…

  • avatar
    Daanii2

    PCH101, let me put this back at you. Under what authority did Steve Rattner fire Rick Wagoner? And under what authority did Steve Rattner decide “to recommend to Tim, Larry, and ultimately the President a package that would include replacing Rick with Fritz as interim CEO, changing at least half of the board, and making an outside director chairman (which should be universal).” All when GM was a public company.

  • avatar
    John Horner

    Daanii2: You don’t seem to understand the authority a lender of last resort has with regard to a company restructuring through a bankruptcy process. Probably not your field of expertise, right?

  • avatar
    Daanii2

    I do understand the authority a lender has. I’ve been an attorney for 25 years in Japan and the US. That included 8 years in the corporate finance group of one of the major US law firms, with 4 years in its Tokyo office and 4 in its San Francisco office. And then 4 years as General Counsel of a public company.

    Along the way, I’ve studied and practiced corporate governance law in the US and Japan. I do not have a lot of experience in bankruptcy law, but I do have some. Enough to know how the basics of creditor-debtor law, and how chapters 7 and 11 work.

    My point is that the presidential task force on autos took over GM before it went into bankruptcy. At that point it was a public company, owned by its stockholders and governed by Delaware corporate law.

    I don’t see how Steve Rattner, or even Barack Obama, had the authority to fire GM’s CEO. Do you think they did? If so, how? I don’t see it. But maybe you or PCH101 do. If so, please let me in on the secret.

  • avatar
    pgcooldad

    I hope this clears it up. Technically, he offered to step aside, and they acted on it.

    “In a mid-March meeting with Rick, I explored his feelings about his team and then tried to work the conversation around to himself. “I’m not planning to stay until I’m 65 but I think I’ve got at least a few years left in me,” said Wagoner, 56. “But I told the last administration that if my leaving would be helpful to saving General Motors, I’m prepared to do it.” He added that neither he nor his board thought that was a good idea.”

    “With that, the meeting dispersed. The recommendation to ask GM’s Rick Wagoner to step aside had received barely a mention.”

    “I don’t know whether Rick had any inkling of why I had wanted to see him alone. His face was impassive as I said, “In our last meeting, you very graciously offered to step aside if it would be helpful, and unfortunately, our conclusion is that it would be best if you did that.”

    http://money.cnn.com/2009/10/21/autos/auto_bailout_rattner.fortune/index.htm?postversion=2009102109

  • avatar
    Daanii2

    I’ve probably belabored the point too much. But I’m a lawyer, after all. And in court, you would not get far relying on the technicality that he offered to step aside, and you took him up on it.

    There’s little question that, legally, Rattner fired Wagoner. Look, for example, at the title of the video that goes with the Fortune article you quote from: “Why I Fired GM’s CEO.”

    I have read carefully Rattner’s Fortune article. I was astounded by his hubris. One sentence struck me as particularly important. “He added that neither he nor his board thought that was a good idea.” GM’s board did not think firing Wagoner was a good idea. Rattner did it anyway.

    Sure, maybe Steve Rattner is a brilliant man who in the space of a few months made tough decisions that saved GM. And then, unfortunately, had to resign to fight charges of influence peddling and kickbacks.

    And maybe Larry Summers, Tim Geithner, and Barack Obama have more clues about how to run a public company than GM’s clueless board. They have so much experience in that area. And they had plenty of free time to spend on GM’s travails. They weren’t too busy in their real jobs, I’m sure.

    And that doesn’t even take into account the brilliant Brian Deese.

    After Enron, Congress passed the Sarbanes-Oxley Act, which we all have to follow. It imposes a big burden on corporate officers and directors. But that burden is supposed to be justified, so that corporations are governed by law.

    I guess that all goes away when you are Steve Rattner. Then you can do anything you want.

  • avatar
    Pch101

    let me put this back at you.

    Sorry, I won’t let you put this back to me.

    I asked you to cite a statute (although you may cite case law if you prefer) that proves your contention that laws were violated. You obviously can’t do that. You’re obfuscating because you don’t have a sound rebuttal that supports your contention.

    Unless you do, I don’t really care about your alleged illustrious track record. A judge wouldn’t care — he’d want a legal argument, and so do I.

    It’s fairly basic: if a party wants control over the board or senior management in exchange for investing equity, then that party has a right to demand it.

    The government was under no obligation to commit funds to GM. If GM didn’t like the terms, it could go get the money from someone else. Quid pro quo.

    If you work in Silicon Valley, then surely you must know that VC’s routinely replace founders when committing equity. It’s the golden rule — he who has the gold gets to make the rules.

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