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The Opel Plan: It’s All About Jobs
The Opel Plan: It’s All About Jobs
Posted Tuesday, November 24, 2009 - 12:05pm
Specifically, it’s about where General Motors—which earlier this month shocked just about everyone when it decided to hang on to Opel, its main European division, rather than sell—will oust thousands of workers. The focus of the jettisoned deal with Canadian parts supplier Magna and Sbrebank, a Russian bank, was to preserve German jobs. For security, the government of Angela Merkel was willing to put up almost $7 billion in financing.
GM may figure that it now has Merkel, who was by all accounts deeply insulted by the decision to ditch the Magna deal, backed into a corner with no choice but to pony up the funds in order to keep her government together. This would represent an interesting twist in the era of bailout capitalism. When Fiat (and now Chrysler) CEO Sergio Marchionne was using U.S. Treasury funding to purchase a stake in Chrysler, he was calling the shots. That tactic seemed to end when he, the opportunist from the private sector, showed an interest in Opel, only to have the Germans look elsewhere for a suitor who would protect German jobs. (Sergio has a reputation as a guy who will vigorously shed employees to turn a company around.)
Now the private sector has come roaring back, but instead of using Marchionne’s supplicating “I have no money” ploy, GM has said that we know enough about what we’re doing to take a chance on Germany yanking the financing, which of course it knows would horrify labor, as it would throw the unions on the mercy of the European Union. The EU has already roadblocked the deal once, arguably giving the GM board the confidence it needed to rebuff Magna and steer clear of a deal it never liked anyway. Bascially, GM has said, we’re really doing much better now and are confident that we’ll be able to restructure Opel. We can do that with German money and protect German jobs, or we can cut German jobs. You choose, Angela! Obvously, the anti-Magna elements on the GM board thought through the politics of this and figured it was a good play to go after the German billions themselves, rather than let the Canadians and Russians have the money.
Business didn’t have this access to hardball during the salad days of Bailout Capitalism 1.0. But as we seem to have shifted quickly to the era of Bailout Capitalism 2.0, the toughness has returned.
Comments
GM and Opel
If this really was a though-out strategy from the GM board, they deserve to be fired promptly. Playing hardball is a dangerous game, and Merkel is not an easy mark.
The problem for GM is that Opel is a German brand, with most of its production, design and engineering expertise in Germany. Any turnaround will rely on the German operations running better than they do now. That means working closely with the German unions and German politicians. Germany is also a huge part of Opel's market. How does GM think that all this hardball played with Opel's German customers?
While GM needs Germany desperately for Opel to turn around, the political fortunes of Merkel are not nearly as tied to the GM's success in that endeavor. Of course there will be job losses in Germany, but only few of those were avoidable anyway. How many hundreds of thousands of euros does GM think Merkel wants to spend on each "saved" job? Merkel has a viable alternative: she can refuse the bailout based on budgetary restraints or EU legal restrictions and blame GM for all layoffs. After all, Germany does not need Opel - they already have Volkswagen, Daimler and BMW. Opel may be the best brand GM has (outside of the US), but in Germany at least, it won't be missed. Why would Merkel support Opel when she has three other major car companies she could support in order to save jobs?
Which explains why Merkel has been telling GM that repaying the Opel bridging loan in time is all well and good, but she expects an long thank-you note to go with it. More importantly, it explains why she is now strongly arguing in favor of the EU laws against state support in exchange for jobs. That's right: properly offended by GM, she is now making sure that no European government can support GM's restructuring plans. That will leave GM no choice but to fund the Opel turnaround itself, and any sensible way of doing that will leave most of its core operations in Germany.
As I said, the schmucks running GM should be fired, whether they did this on purpose or out of sheer ignorance.
And GM has caved
GM has now promised to keep all German Opel plants open, with no obvious concessions from the German government. There's likely to be only 4000 jobs lost in Germany now, less than Magna was going to cut. Give Merkel a few more weeks and GM will promise to reinvest billions in the German operations without more than token government assistance. All underwritten by the American taxpayer, of course.