The Opel Precedent Next Crisis Looms for German Economy
In the end, Berlin managed to find a solution for ailing Opel. But the carmaker isn't the only German company listing toward bankruptcy. Indeed, the next crisis, that of department store chain Karstadt, has already become an issue in Germany's developing election campaign.
The sighs of relief could be heard across the republic this weekend. After months of hand-wringing and hard work, the German government, in conjunction with the Canadian auto-parts supplier Magna and its Russian partners, finally managed to find a way over the weekend to save Opel from being dragged down by its US parent General Motors. The price tag for German taxpayers was, at 1.5 billion ($2.12 billion) in bridge financing, not insignificant. But Berlin hopes that most of the 25,000 German jobs at Opel will be saved.
Arcandor employees demonstrating for state assistance in Berlin last week.
On Sunday, the dilemma turned into a full-fledged campaign debate as leading German politicians begin jostling for position ahead of general elections in just under four months. And, just as he did in the Opel conundrum, German Foreign Minister Frank-Walter Steinmeier -- who is also the Social Democrats (SPD) candidate to challenge Chancellor Angela Merkel for her job -- went public with a demand that Karstadt be saved.
"We need a concept for the future, one which ensures the survival of lively department stores and lively city centers," he told the tabloid Bild am Sonntag. In response to those voicing doubt about a Karstadt bailout, Steinmeier said "it's as if we shouldn't be concerned about the blighting of city centers in Germany. And we shouldn't forget, we're talking about 50,000 jobs here."
SPD head Franz Müntefering likewise took a few steps down the campaign trail on Sunday, telling the Berlin paper Tagesspiegel am Sonntag that "we want to show that we don't just save industrial jobs, but also in the service sector and jobs for women."
But it's not quite as easy as the SPD is making it out to be. As part of its second economic stimulus package pushed through back in February, Berlin included a fund to help out ailing German companies. But it wasn't intended for just any ailing company. Rather it was designated to help those firms that ran into trouble as a result of the financial crisis. More specifically, the 40 billion program was for those companies which were healthy as of July, 2008.
According to the Sunday edition of the Frankfurter Allgemeine Zeitung, some 1,164 companies have applied for state help from the pot with some 345 having already been granted aid. More, worrying, however, is the fact that the Opel deal makes a mockery of the July, 2008 cut-off -- the car company was struggling long before that date.
So too was Arcandor, which is what has prompted the grave doubts voiced in Chancellor Merkel's conservative camp as to the wisdom of throwing money at the department store chain. The company is requesting loan guarantees worth 650 million ($918 million) in addition to a 200 million loan from Germany's state-owned development bank KfW.
Leading the anti-charge is Economics Minister Karl-Theodor zu Guttenberg, a member of the Christian Social Union (CSU), the Bavarian sister party to Merkel's Christian Democratic Union (CDU). Sounding much as he did during the debate over the Opel bailout, he told the newspaper Passauer Neue Presse over the weekend that "those who hold out the possibility of hundreds of millions for companies on a federal level without first undertaking a close examination of the company involved is waging a campaign on the backs of the taxpayers."
Roland Koch, the governor of Hesse and deputy head of the CDU, likewise urged caution, saying he was "very skeptical" of an aid package for Arcandor.
Guttenberg, for his part, gave voice to similar concerns during last week's last second push to save Opel. The final deal, approved by German states on Sunday, foresees Magna taking on a 20 percent stake in Opel with the Russian-owned Sberbank acquiring a 35 percent holding. GM retains 35 percent with the remaining 10 percent going to Opel employees. The Magna deal will likely result in a cut of some 11,000 jobs at GM Europe (out of 50,000), with 2,500 of those being lost in Germany, where Opel employs just over 25,000 workers.
But Guttenberg attracted the ire of the SPD by wondering aloud if perhaps an Opel bankruptcy would ultimately have been the cheaper way to go. Indeed, the SPD in recent days appears to have been trying to turn Guttenberg into the neo-liberal villain of their election campaign. Now, he appears to be once again offering the SPD an open flank for their campaign offensive.
For the SPD, however, throwing its support behind an Arcandor bailout is a risky move. After all there is little to guarantee that state help now will ensure a bright future for the department store chain -- a model which has been under pressure for years in Germany as large malls slowly replace the one-stop shop. It could just delay the collapse.
cgh -- with wire reports
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