Opel Aid Headed For Failure Again?

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?