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  Tough Negotiations: Germany Wins Concessions in US Talks on Opel

Tough Negotiations Germany Wins Concessions in US Talks on Opel

By Marc Pitzke and Gregor Peter Schmitz in New York and Washington

German Economy Minister Karl-Theodor zu Guttenberg, in the US for talks aimed at rescuing automaker Opel, has won concessions from Opel's parent company General Motors. But the German subsidiary's survival also hinges on whether the US government approves GM's own recovery plan by March 31.

It's an itinerary worthy of a state visit. Some 40 journalists have accompanied German Economy Minister Karl-Theodor zu Guttenberg on his trip to New York and Washington to explore rescue terms for ailing automaker Opel, the German unit of General Motors.

At dinner in New York he sat next to legendary investor George Soros. On the 40th floor of Morgan Stanley's office tower, the bank's CEO John Mack explained the Manhattan skyline to him.

The bosses of Goldman Sachs and JP Morgan Chase invited him for a chat. And then, shortly after 10 p.m. on Monday night, the minister found himself sitting in the elegant hall of the Hay-Adams Hotel right next to the White House. This is where President Barack Obama and his family lived before his inauguration.

Guttenberg had just met GM CEO Rick Wagoner in the residence of the German ambassador in Washington for talks that centered on the toughest question Guttenberg has to address: How serious GM is about saving Opel.

The conservative politician, 37 and only appointed last month, knows that Germany is paying close attention to his US trip. His task is to save Opel, which employs some 25,000 people back home. GM is on the brink of insolvency and hasn't given much indication of how it proposes to help Opel. So far, it is demanding an advance payment from European governments as part of an Opel rescue -- some €3.3 billion in loan guarantees, with the German government expected to foot most of the bill.

Waning German Faith in GM

The German delegation is frustrated at the stance GM is taking. One official said it was "unbelievable" how GM had behaved in talks over recent weeks. There's not much faith in the figures the US auto giant has been quoting in talks.

"Berlin has been asking the same questions in Berlin and Washington for weeks," Guttenberg himself said in New York. "For months there haven't been any answers." That stance is fuelling doubts about GM's commitment to solving the problem. Or is it just a negotiating tactic? Guttenberg laughed, and his answer sounded a little like a threat: "I can only warn against playing poker."

It's significant that the crisis meeting took place in the German embassy in Washington and not at GM's headquarters in Detroit, where the governor of the German state of North Rhine-Westphalia, Jürgen Rüttgers, had travelled in February to negotiate Opel's future.

The German government doesn't want GM to think that Berlin is asking for favors. Guttenberg appears to have made that clear in his talks with GM's management.

Speaking to reporters in the Hay-Adams hotel on Monday, Guttenberg said he had made his position abundantly clear in his meeting with GM. He didn't get a wish list from the US automaker. Instead, he presented some demands of his own.

"I received one or two signals that I haven't received before," said the minister, without revealing what they were. Members of the German delegation said they had wrought two concessions from the GM executives in difficult talks: The first concerns the freeing up of Opel patents that belong to GM and are being held by the US government. Secondly, GM confirmed that it would accept a minority stake in a new European auto conglomerate, an idea proposed by Guttenberg and the German government.

Unresolved Issues

It's still open whether any German state aid for Opel would end up flowing to GM in Detroit, something the German government is trying to prevent. To complicate matters, no investor has so far registered an interest in taking a stake in Opel, and Guttenberg regards a rescue as impossible without such an investor. He told reporters in Washington that talks on this were were ongoing. George Soros said he personally would be surprised if an investor emerges.

According to members of the German delegation, the talks with Wagoner produced a plan for Opel which will take effect if GM manages to avert the looming insolvency. March 31 is the deadline. On that day, GM must present a new rescue plan to the US government. If it doesn't get fresh state aid, insolvency proceedings will begin. It's possible the deadline could be pushed back by a month, but Obama's team is believed to be insisting on March 31, because he wants a decision in advance of the April 2 summit of the G-20, the world's leading industrial and emerging economies, in London.

And so Opel's fate hinges partly on the decisions of the US government. GM's concessions aren't worth much without the government's approval, for example on the Opel patents.

Since last week, a task force of lawyers and experts hired by the White House has been examining GM's plans. US media are reporting that the team is leaning towards the option of a controlled insolvency, but that may just be a way of pressuring the company into making further concessions.

"If GM files for insolvency, we'll be on a totally different track," said Guttenberg. Which means: Opel's situation would be fundamentally reassessed.

One way or another, massive job cuts at GM and Opel are looming whether the US government approves GM's rescue plan or accepts a controlled insolvency. There's hardly likely to be any capacity increase, as Guttenberg put it.

So there's plenty to talk about on the last day of the minister's US visit. This Tuesday he's scheduled to meet US Treasury Secretary Timothy Geithner and Obama's top economic advisor, Lawrence Summers.

Apart from the Opel crisis, talks are likely to address the US demand for a further German economic stimulus package. Guttenberg rejected the idea outright in New York, pointing out that economy-boosting measures taken by the German government so far already amount to 4 percent of gross domestic product.

The US government is likely to take a different view. Perhaps Guttenberg should stick to the tactic he used during the thorny GM talks in Washington. "One can say a friendly hello and a friendly goodbye -- but have an unembellished conversation in between."