The Reilly Dilemma

Bertel Schmitt
by Bertel Schmitt
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the reilly dilemma

The German paper Rheinische Post runs an interesting op-ed piece today. Headlined: “Opel fights its demise,” the article concludes that Opel most likely won’t make it:

Opel CEO Nick Reilly is facing a dilemma. Even before the outbreak of the economic crisis, Opel was confronted with an overcapacity of 20 percent. The Abwrackprämie being behind us, sales will crater. This creates extra pressure to eliminate more jobs. If Reilly implements his restructuring program, then he will have to fight the opposition of the workers. For once, it is easy to put a number to this: €265m a year. The workers wanted to forgo this sum – if Reilly won’t shut down any plants. Now Reilly is €265m short – and has to cut more jobs. At that point, the governments, on who’s support Reilly counts, will call it quits. Whether Opel is kept alive with tax money, with funds from the parent, or with money from the workforce: an artificial respiration of a company is ultimately more expensive than anticipated. And it is almost never successful.

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=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • OldandSlow OldandSlow on Jan 22, 2010

    I don't know who threw out the low ball €265m figure, but it sounds to be an implausibly low figure. Even if they make decent car relative to their competition, it will be impossible to maintain sales even at last year's level given the bad PR and inevitable talk of Opel/Vauxhall going under. Eurozone is a land of entitlement in which plant closings to allow consolidation don't go over smoothly at all.

  • Rnc Rnc on Jan 22, 2010

    There has been a slow change in Germany (atleast from what my German co-workers say) away from the entitlement, 35 hour work week, etc. and union gridlock. They are finally understanding that Europe now has a south (eastern europe) and mexico (turkey) and the euro unions are much more likely to understand that 85-90% of what you had is better than nothing what so ever (UAW never seemed to grasp this reality). The 265 figure are the labor savings the union promised when Opel was to be sold (closing the antwerp plant probably accomplished much more). GMNA has the finances and balance sheet to restructure Opel w/o governemnt help, it seems that the new board is intent on doing it right, which is a very good sign.

    • See 1 previous
    • Rnc Rnc on Jan 22, 2010

      You don't make $70 billion in liabilities disappear and $40 billion in cash appear with the magic of managerial accounting. It's pretty well established what they came out of BK with. On another note, according to GAAP (in the recent past) enron, worldcom, tyco, Qwest and just recently all of these banks and financial institutions were doing just great, don't know what happened. I would trust the statements of a company exiting bankruptcy (with the approval of the court) over GAAP (and I am an accountant).

  • Getacargetacheck Getacargetacheck on Jan 22, 2010

    With the world getting smaller it seems that GM's long-standing "strength" of regional makers/brands all under one GM umbrella is now a liability. Names that have global reach are viewed more favorably. Lots of politics and pride involved with Opel in Germany no doubt. But it seems GM's best course of action is to forget manufacturing in Western Europe and focus instead on producing in Eastern Europe under the Chevrolet banner.

  • Steven02 Steven02 on Jan 22, 2010

    I don't think anyone was really surprised by this. GM will be closing plants in Europe. I think this is actually a good move toward getting a contract done. The unions need to know that the cuts are going to come. They can help and make it the best they can for them (the union), or just standby and watch the jobs disappear. The 265 million Euro's I don't think are going to make a difference considering the 8000-10000 jobs they are trying to cut (in the long term). 20% overcapacity is expensive.