An Editorial by Severin Weiland
A black eye for German Chancellor Angela Merkel
A wave of outrage is breaking across Germany. The news that General Motors has decided not, in the end, to sell Opel as planned has many giving voice to their indignation on Wednesday. The governer of the western German state of Hesse, where Opel's headquarters and largest plant is located, Roland Koch, said he was "deeply shocked" and "angry." His counterpart Kurt Beck, from neighboring Rhineland-Palatinate, also home to an Opel plant, spoke of an "impertinence." And Jürgen Rüttgers, governor of North Rhine-Westphalia -- befitting his current re-election campaign -- outdid them both, saying that the behavior of the US company shows "the ugly face of turbo-capitalism.
German Chancellor Angela Merkel, who on Tuesday gave a well-received speech before a joint session of Congress, has so far held her tongue. The news reached Merkel just minutes before she was set to take off for her flight home -- her aides attempted to contact White House officials immediately.
A Black Eye for Merkel
The news is a debacle for Merkel. The chancellor has invested massive amounts of political capital in the attempt to save Opel, presenting herself and her government as the savior of German jobs. Merkel had her doubts about the wisdom of springing to Opel's aid, to be sure, but she kept them quiet, as is her wont.
When it became clear that Opel was to be sold to Magna, the Canadian-Austrian auto parts supplier and its Russian partner, then it was the chancellor herself who announced the news in a relaxed atmosphere in the Chancellery. And she even did something she never usually does -- she accepted personal responsibility for the success. "Patience, single-mindedness and clarity," had paid off, she said proudly.
For a brief moment Merkel was acting like the former Chancellor Gerhard Schröder -- and promptly ended up with a black eye. There is no way out of this for the mistress of wriggling around things. The failure of the Opel rescue plan is above all Merkel's failure.
And from the very beginning it looked highly unlikely that state intervention was going to succeed here. Everyone involved knew that. Opel is ailing. There is a massive oversupply of cars on the global market. Experts frowned and there were doubts in the Economics Ministry that state aid and selling off to another investor would be the right path. These doubts were expressed during that long night in May when then Economics Minister Karl-Theodor zu Guttenberg of Bavaria's conservative Christian Social Union (CSU) party called into play the possibility of a well-ordered insolvency. The politician, who was only new to his post, lost his nerve that very same night after the chancellor took him to task. The risks of an insolvency would be "politically irresponsible," Merkel concluded. However, it would most likely have been the most honest thing to do, and possibly the best thing for Opel."
A Short Reprieve
The problem with politicians is that they have to pay attention to the public mood and to the media, which could hold a courageous decision against them. Nevertheless, Guttenberg articulated those doubts which have prevailed in the population for some time. Polls show that ordinary citizens have grown suspicious of government bailouts -- and rightly so. Examples of failed bailouts abound in Germany, such as that involving the construction company Holzmann, which went bankrupt in 2002 after an infusion of funding from Berlin.
At best, public intervention only gave the companies a short reprieve, sometimes for a few years, sometimes just for a very short time, as the example of the mail-order company Quelle shows. CSU boss Horst Seehofer personally made sure, in conjunction with the federal government, that Quelle received €50 million in the summer. Now the remains of the company are being sold off at bargain prices and thousands of jobs will be lost.
The same fate -- at least in part -- could now befall Opel. The Bochum, Kaiserslautern and Eisenach plants had already been in danger and are now probably even more at risk. Now GM is asking for €3 billion for a restructuring program. On the one hand, politicians are unlikely to want to risk burning their fingers a second time by working with such an unpredictable player. On the other, there is still the imperative to save jobs. The politicians are therefore prisoners of their own rhetoric.
Backburner Industrial Policy
Their concentrated effort on behalf of Opel was the latest -- failed -- symbol of an industrial policy that, from the very beginning, was always placed on the backburner. Driven by perceived voter anger, the alliance of affected countries allowed themselves to become dependent on the decision of GM's fickle US-based executives. In late summer, when an apparent breakthrough had been announced in Berlin, it showed just how dubious the decision to back the deal had also been here in Germany. Within the trust established by the German government after GM's bankruptcy to guide Opel's future, the two representatives of the German government and federal states opposed a sale -- out of fundamental business considerations. The only reason the deal with Magna could be announced in the end was because the representative of the German states abstained from voting.
It was Merkel herself who mocked the concerns of the two trust members (the representative of Germany's federal government even voted against the deal). Despite his public criticism of the deal, Guido Westerwelle's business friendly Free Democrats (FDP) secretly did the same thing. The party is part of the state governments of North Rhine-Westphalia and Hesse and FDP politicians there didn't do much to try to stop the government-brokered Magna deal. The FDP's federal economics minister, Rainer Brüderle, is now speaking of an "unacceptable" decision from Detroit and is at the same time stating that his earlier concerns have now been confirmed to the fullest degree possible.
But none of that will help. The FDP, as part of Merkel's government, will also share at least some of the political liability for the debacle.
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