By on June 1, 2010

Technical experts analyzing GM’s request for $1.35b in Opel aid from the German government have reported back, and the signs aren’t looking good. According to the Financial Times, the experts advising a political committee that will rule on Opel aid next week returned a negative outlook on The General’s request. German officials tell the newspaper that

the technical experts’ stance was “formally not a complete No” but that it “meant No in practice”

GM is requesting €1.9b in loans for its €3.7b restructuring of Opel. Though it looks like the €1.2b ($1.35b) it is requesting from Germany will be turned down, some portion of that amount might still be awarded by local German state governments. If that scenario plays out though, more employment cuts could be in order for Opel’s German production staff.

GM’s timing for requesting government aid couldn’t be much worse. Germany is facing a huge outlay as part of its rescue plan for Greece and other fiscally struggling states in the Euro-zone. And this financial pressure is occurring on top of reluctance on the part of the German government to bail out the European operations of a now-profitable (except in Europe) GM. Germany’s finance minister Rainer Brüderle tells the WSJ [sub]

It’s an open secret that I’ve been skeptical of this whole thing from the beginning

Michael Fuchs, deputy member of the German parliament’s economics committee adds his skepticism to the record [via Automotive News [sub]], saying

We cannot possibly tell the people, “You have to put up with higher costs while we’re propping up a company like GM that is perfectly able to cope by itself.” I don’t expect the government to grant aid.

The Financial Times of Germany also reports [via AN [sub]] that

the advisory panel found no financial reasons to extend loan guarantees to Opel. That means any decision in favor of aid would be based on political rather than financial factors, such as a desire to preserve good U.S.-German relations

Given the current state of US-German relations, especially on the topic of Opel, this doesn’t make a deal seem any more likely.

The UK has already agreed to a nearly €300m loan package, and despite a change in governments in that country, the new Prime Minister has indicated that he will stand by the offer. If Germany’s federal aid falls through though, Opel union leaders say their deal with GM’s German division remain in effect, setting GM up for yet another confrontation with labor. After all, without the ability to cut jobs in retaliation for a German loan denial, GM will have little choice but to renegotiate with German unions, or make cuts elsewhere. With a Belgian plant already doomed to wind-down, and smaller loans from Spain and the UK hanging in the balance, losing German aid will force GM to jeopardize good relations with one of these more generous governments.

Opel’s Nick Reilly says that even if German federal aid falls through, up to four German states are likely to make up for at least some of the shortfall. He would not, however speculate on possible modifications to Opel’s restructuring plan, saying he is

not working on a Plan B

Maybe it’s getting to be time to start?

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3 Comments on “Opel Aid Headed For Failure Again?...”

  • avatar

    There are a lot of rumors floating around. Franz of the unions says the reports are wrong, but the thinking is he’s whistling in the dark.

    There will be another committee, then, the final decision will be made by Minister Bruederle. He’s always been against it, but he needs cover from the committees. Anything else than “yes, yes, yes, absolutely!” will count as a “no.”

    Final decision sometime next week.

    Most if not all aid from the states (and the UK) is contingent on German federal aid.

  • avatar

    …”any decision in favor of aid (for Opel) would be based on political rather than financial factors…”

    The only true words in the Financial Times piece. Everything else we read in the press these days, like the UK government’s “offer” of a loan package, is political posturing aimed at striking a proactive stance while actually doing nothing, in the expectation that Washington will be forced to continue saving Opel in order to keep the lip gloss from washing off its Government Motors/UAW bailout pig.

  • avatar

    GM really wants to go head-to-head with BMW? Fine, go beat them on their own turf. The auto business is truly global right? Move Cadillac to Germany and establish it there as a wholly-owned subsidiary. Have “Cadillac” buy one or two high-wage Opel plants and put some Germans (maybe Karl Stracke?) in charge (particularly those with a chip against Daimler and BMW). Then, build the rest of the Opels in Eastern Europe and blame the Western Europe plant shutdowns on the German government. Better yet, scrap the Opel (and Vauxhall and Holden and Daewoo) name altogether and make them Chevrolets worldwide. Opel problem solved.

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