Government Aid Debate Berlin Has Doubts About Opel's Rescue Plan

German carmaker Opel, the troubled subsidiary of ailing US giant General Motors, submitted a restructuring plan this week in an effort to secure a government bailout package. So far, Berlin isn't buying, but with national elections this autumn, credit guarantees or loans to the company may be inevitable.


The Opel brand remains at risk.
AP

The Opel brand remains at risk.

The German government remains skeptical about providing aid for car manufacturer Opel. Finance Minister Peer Steinbrück said late on Monday that the government couldn't reach a decision on aid based on the restructuring plan Opel had presented.

Steinbrück, speaking on the late-night talk show "Beckmann" on German public television, said Opel needs to come up with a sustainable plan of its own before the government could provide aid, and that the program presented on Monday didn't suffice.

The finance minister said it remained unclear how Opel would be able to disentangle itself from its ailing US parent General Motors. He didn't rule out state aid, however, arguing that a collapse of Opel could lead to the loss of around 50,000 jobs if suppliers are included, which would end up costing the state €3 billion to €4 billion in benefits.

Economy Minister Karl-Theodor zu Guttenberg has also said that the government hasn't yet decided whether to bail out Opel. He said in a television interview on Monday that he needed to review Opel's plan very carefully, and that there were many open questions. Any state intervention mustn't distort competition, the minister said, adding that Opel would not get any special treatment.

On Monday, the European head of GM, Carl-Peter Forster, Opel CEO Hans Demant and the head of Opel's works council, Klaus Franz, had presented their rescue plan to zu Guttenberg.

GM Europe said it plans to spin off Opel to try to avert job cuts and plant closures and said it needed €3.3 billion ($4.16 billion) in aid from European governments.

The German government is mainly considering helping Opel through loan guarantees, but direct loans and even a share stake haven't been ruled out. Any aid will also depend on the actions of GM and the US government.

Graphic: Opel plants in Germany and Europe
DER SPIEGEL

Graphic: Opel plants in Germany and Europe

Under the restructuring plan, Opel would close GM Europe headquarters in Zurich and relocate it to its German plant in Rüsselsheim. But the problems would only start there.

GM made a loss of €2.8 billion in Europe last year, not least because the company has too many plants there. The attempt to sell the plant in Eisenach, in eastern Germany, has failed so far. The plant in Antwerp, Belgium, is under threat and the plant in Bochum, in the German state of North Rhine-Westphalia, isn't expected to survive in the long term.

But if the governments of Belgium and the German state of North Rhine-Westphalia end up injecting money into Opel, the company will hardly be able to close its plants in those areas. Besides, the group needs to find a partner in the auto industry to be able to finance necessary long-term investments. And no such partner is in sight.

Mounting Pressure on Berlin

The prospect that state aid for Opel will ensure its long-term survival hasn't improved. But there's mounting pressure on the government to help the company out.

The center-left Social Democrats, who share power with Chancellor Angela Merkel's conservative Christian Democrats, have pledged to do whatever they can to rescue this "systemic auto company," as SPD leader Franz Müntefering put it.

The governors of the German states that have Opel plants -- North Rhine-Westphalia, Hesse, Rhineland-Palatinate and Thuringia, have also raised the possibility of a government stake in Opel if credit guarantees or direct loans don't suffice.

In the end, the Berlin government won't be able to say "no" to an Opel rescue, even if it's just temporary. With a general election in September, the government can't afford mass layoffs and plant closures at the venerable automaker.

Steinbrück was also skeptical about possible government aid for troubled German automobile components manufacturer Schaeffler, which is privately owned. He said other options needed to be checked first -- such as spinning off tire maker Continental which Schaeffler acquired last year.

The Schaeffler family's own assets also needed to be considered, Steinbrück added, saying that so far the company hadn't come up with a restructuring plan "that allows sustainable aid."

Skilful Campaign for State Aid

Schaeffler, too, has skilfully increased its pressure on the government. Company chief Maria-Elisabeth Schaeffler gained a lot of media attention when she shed tears during a demonstration by workers seeking government help last month.

Thousands of Schaeffler workers and their families attend a protest march calling for state aid for the ailing company on Feb. 18 in Herzogenaurach, Germany.
AP

Thousands of Schaeffler workers and their families attend a protest march calling for state aid for the ailing company on Feb. 18 in Herzogenaurach, Germany.

The management has got the IG Metall engineering trade union on its side by agreeing to give workers a greater say in the running of the firm and holding out the prospect of employees gaining a stake.

Industrially, Schaeffler is even more important than Opel, because it employs 220,000 workers together with its new subsidiary Continental.

However, neither Mrs. Schaeffler nor her son Georg have so far given the kind of basic information any jobless person applying for benefits would have to provide. How great is their personal fortune? What proportion of the company's profit has landed in their private accounts? Are they ready to invest part of that to save the company?

The opponents of wholesale state intervention are alarmed -- if the government rescues companies under such questionable circumstances, what justification does it have to deny help to any other firm?

"Agreeing to provide aid would be extremely dangerous," says Michael Fuchs, an expert on the small and medium-sized business sector for the Christian Democrats. "In that case we might as well subsidize the entire auto sector."

Tears -- Maria Elisabeth Schaeffler, owner of the Schaeffler group, crying during a demonstration by workers in front of the company's headquarters in Herzogenaurach, Germany last month.
AP

Tears -- Maria Elisabeth Schaeffler, owner of the Schaeffler group, crying during a demonstration by workers in front of the company's headquarters in Herzogenaurach, Germany last month.

Separately, Steinbrück said on Monday he assumed the US government would prevent the collapse of a systemically important company like insurance group AIG. The company reported a $62 billion quarterly loss this week -- the greatest in corporate history. The news helped drive the Dow Jones industrial average to its lowest point since 1997.

Steinbrück said a failure of AIG would be disastrous for Germany because the company has insured many leasing deals made by German municipalities.

Steinbrück also said he didn't see an end in sight to the financial crisis yet. "We're not through the worst." Confidence in the banking system still hadn't been restored.

With reporting by SPIEGEL staff

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