By on November 25, 2009

Wennemer’s vision. Picture courtesy bild.de

European governments that are lured into propping up GM’s Opel should resist the urge, said former Continental AG Chief Executive Officer Manfred Wennemer to Bloomberg. Why? It will cost them twice.

Aid for Opel will backfire by postponing closures of outdated factories and saddling rivals including Volkswagen AG and PSA Peugeot Citroen with uncompetitive costs, says Wennemer.

“So what we do is weaken the VWs, the Fords, the Peugeots. They all have to reduce capacity. They all have to pay for restructuring.”

Wennemer, a trained mathematician, figures the European automotive workforce should be reduced about 25 percent to match production with demand.  If jobs are saved at Opel, people have to be fired elsewhere. If Whitacre thinks he can save Opel on his own, let him.

Wennemer knows what he’s talking about. He sat on the board of the Opel Trust and voted against a German-financed sale of Opel to Magna International Inc. He said taxpayers had little chance to recoup the €4.5b in proposed aid. He received major flak from Berlin. As an answer, Wennemer resigned from the trust, saying political influence had overtaken commercial interests.

Wennemer thinks any aid for ailing Opel weakens European manufacturers and plays into the hands of the Asian enemy.

Toyota, Hyundai, and Kia are setting up plants in central and Eastern Europe, where labor and production costs are lower than in Western Europe. Daimler AG, which is building a new factory in Hungary, has said wages in the country are typically less than 10 Euros an hour compared with 44 Euros in Germany.

In the meantime, Automobilwoche [sub] reports that Nick reilly promised to keep all German Opel plants open.  Guess how much that promise did cost and who will pay for it. Wennemer had prognosticated: ““Germany will definitely come to the party. We will sit a little bit in our corner, but GM’s going to get what they want.”

Reilly graciously lowered the target of 10000 jobs lost to only 95000. Of  those, 5300 will be lost in Germany.

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7 Comments on “Wennemer: Opel Must Die...”


  • avatar
    Vega

    Unfortunately these decisions are rarely made with an eye on the whole European economy, but from a national perspective. The UK government for example has a quite a strong incentive for subisidies, as most of the negatively affected competitors (except for Ford) don’t have production capacities in Britain.
    “As an answer, Wennemer resigned from the trust, saying political influence had overtaken commercial interests.”
    How can anyone be surprised by that? This shows the major disconnect in thinking and experience between managers and politicians.

  • avatar
    Bunter1

    For awhile I have been thinking that the gov’ts around the world are throwing the op to let global overcapacity to address itself. 
    The pain many fear if these aren’t proppped up may be real, but I suspect the long term mess the pols will create will dwarf that.
    Many of capitalism’s critics miss the point that capitalism has been trying to correct itself and the gov’ts keep interfering.

    Bunter

  • avatar
    Mr Carpenter

    +1, well said, Bunter.

  • avatar
    european

    +1 @ bunter’s comment

    but i was trying to rationalize the gov actions. seems to me like they assume the economy will pick up and all will be fine. if they let opel go now, it’ll never come back and some other (korean, chinese?) company will take opels market share (in the improved economy of course). thats why they decided to keep opel, + keeping the jobs, + political reasons and so on.
    but they could be very very wrong about the economy picking up…

    p.s. personally, i’d want opel to drop dead. while the cars are quality made, they kinda lost themselves. kia/hyundai is what opel is supposed to be. the smart cheap choice. and opels of today (insignia/new astra) look somehow overdone, too much going on, not a clean sleek design.
    + yea, a dead opel means GM has to get compact cars from daewoo. which is not so bad, coz opel styling wont do any good in the US. the vertical grill of the Buick regal just wont work, another failure. whos gonna buy that?
    i think the daewoo styling is more in line with whats wanted in the US. the new cruze looks alright (for theUS).

  • avatar
    psarhjinian

    Many of capitalism’s critics miss the point that capitalism has been trying to correct itself and the gov’ts keep interfering.
     
    The problem is that those “corrections” carry a nasty social cost.  Sometimes that cost might be worth it, sometimes not.  It’s the job of social democratic government (in theory) to look a little down the road and lessen the harshness of those corrections so that people aren’t put through the wringer.  This applies equally to situation where you need to temper gain as well as loss.
     
    Yes, the market is an ecosystem, and yes, it self-corrects.  It’s another thing to say to people drowning in a flood or starving in a drought to say “well, eventually it will all self-correct”, just as it’s hard to say to people whose potable water was poisoned or who were thrown, en masse, out of work and are looking into the maw of a depression that “when you all die of cancer there’s no one to buy goods, and thusly they’ll stop polluting” or “in fifty years the trade imbalance will equalize”.
     
    Pure market capitalism  is only slightly more workable than pure communism.

    • 0 avatar
      jkross22

      It’s the job of social democratic government (in theory) to look a little down the road and lessen the harshness of those corrections so that people aren’t put through the wringer.  This applies equally to situation where you need to temper gain as well as loss.
       
      Interesting… where was the gov’t when the real estate bubble occurred?  If you recall, it was the government that kept rates ridiculously low causing the bubble to occur.  Not a Dem or Rep issue alone, but a systemic failure due to both sides gaining too much and losing too little to stop it.

      It’s another thing to say to people drowning in a flood or starving in a drought to say “well, eventually it will all self-correct”
       
      Katrina was a natural disaster, far from bailing out failed auto makers and banks that are ‘too big to fail’.  As soon as the government started to throw around ‘bailout’ money instead of breaking up those banks that are TBTF and let the dying automakers die, it became a stronger force speeding the train up further.
       
      The bailout of GM, Chrysler and many of the banks would be akin to bailing out book copiers when the printing press was invented or cotton laborers when the cotton gin was invented.

  • avatar
    ra_pro

    psarhjinian,
    I like your attitude and your answer. To add to it, the classical socialism as practiced in the central and Eastern Europe circa between 1945 and 1990 was really good at job creation/preservation and not that great at product creation but still decent. As I said before many of the products made in Eastern Europe decades ago  are an order of magnitude better than the current offerings by the Western companies from their factories in China. Capitalism, as practised in the last 60 years, on the other hand is extremely good at product creation (not a good product often but at least cheap) but really miserable at job creation or preservation. Since humam animal is above all a consumer and a producer(worker) only after that, capitalism  looks a lot better from the than it actually is. Overall it has slight edge just because it is able to self-correct, or more precisely it can really on the government to correct it which is exactly what socialism does except less efficiently.

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