The World from Berlin 'If the Opel Deal Destructs, Merkel Will be Disgraced'

General Motors' failure last week to decide on the sale of its unit Opel has met with strong criticism from Berlin. German media commentators say the Opel saga poses risks for Chancellor Angela Merkel ahead of the Sept. 27 election and could hurt relations between the US and Germany. They also warn that Opel could fall victim to political election tactics.

German politicians are putting pressure on American car maker, General Motors.

German politicians are putting pressure on American car maker, General Motors.

Late last week the board of beleaguered American automotive giant General Motors managed to decide one thing about their European subsidiary, Opel. They decided not to make any decisions.

In Berlin, where politicians have been pushing General Motors (GM) to accept a bid from Canadian auto parts manufacturer, Magna, there was consternation. The fallout saw German Chancellor Angela Merkel give an interview on German television channel, ZDF, on Sunday evening, in which she spoke about a "conflict of interests" between GM and the German government. Last week, Merkel spoke to American President Barack Obama about the situation, urging him to help ensure a quick decision by GM.

Since June 1, when GM filed for bankruptcy in the US, the German government has been trying to figure out how to keep Opel, part of the GM's European operation along with Vauxhall in Britain and Saab in Sweden, running. Opel employs around 54,000 workers in Europe and just under half of them -- around 25,000 -- are in Germany. Hence the German government's strong interest in keeping the car manufacturer going, especially with a general election looming on Sept. 27.

In its current financial state, GM cannot afford to keep Opel and there have been several bidders for the company. After debates about nationalizing the firm and then promises of bridge financing of 1.5 billion ($2.12 billion), German politicians finally came out on the side of the bid from Canadian auto-parts manufacturer, Magna.

Analysts point out several reasons for this. Most importantly, it looks likely that Magna will keep more Opel jobs in Germany than any of the other bidders. The fact that the firm is already in the automotive business is also considered positive. There is also a Russian connection; Magna's partner in the deal is Russia's largest bank, Sberbank -- Germany seems to be working ever more closely with Russian businesses and Russia is a very important trading partner for the European Union's biggest economy. In return, Russia would gain a toehold in German manufacturing and the move could help modernize Russia's auto industry. And last but not least, it has also been suggested that Magna's Austrian connections -- the firm was started by an Austrian-Canadian businessman who remains on Magna's board -- make the Germans feel more comfortable.

In order to lubricate Magna's deal with GM, the German government has said that if their preferred bidder is accepted by GM, they will provide €4.5 billion ($6.4 billion) in aid to support Opel's operations.

However GM clearly doesn't see the things the same way. And this is where what Merkel has described as a conflict of interests arises. GM says it would prefer the bid from Belgian investment firm RHJ International because with that bidder's proposed plan, GM might be able to re-integrate Opel once current financial issues have been resolved. Whereas under Magna's plan, GM only gets a minority shareholding and would lose influence over Opel's production and distribution. Analysts also suggest that GM is concerned about the possibility of GM patents and other intellectual property falling into competitors' hands.

Which is why the upshot of the GM board meeting late last week was as follows: GM plans to ask for more information, including asking questions about the German state financing. So far, Germany has not made any financial offers in the direction of the RHJ deal. There are also fears that GM, which is now doing better financially, may not even sell Opel.

Merkel told television interviewers that she regrets that "a final decision wasn't made. But," she said, "I hope it will happen soon. Because both for the workers and the economic situation at Opel, we urgently need a decision."

Opel union chief Klaus Franz also struck a note of urgency during an interview with German national radio, Deutschlandfunk, on Monday morning. "Our patience is absolutely exhausted," he said and added that if the situation was not clarified by the end of the week, there would be "spectacular action" taken by workers, although that would not necessarily take the form of strikes.

Yet German media commentators are questioning this need for speed. They say that there are plenty of unanswered questions surrounding the Magna deal and they fear that the upcoming German elections, both regional and national, are influencing the way the German government is dealing with the issue. They also worry about repercussions on foreign policy -- Lord Peter Mandelson, the British minister for business, has already criticized Merkel for putting too much pressure on the Americans over the Opel deal.

The center-left Süddeutsche Zeitung writes:

"Another round of negotiations, yet another reason to procrastinate. To understand this situation you need to remember who exactly sits on GM's supervisory board. There are representatives of the American and Canadian administration, flanked by representatives from the United Auto Worker's union. But ultimately it will be the German and American governments that wrestle over Opel's future.

"This is not necessarily the best basis for making a decision that ends up being both economically sound and sustainable. There are American jobs balanced against German jobs and German jobs balanced against British jobs. Subsidies provided by German taxpayers are another key factor. Of course, this whole opaque game could end surprisingly: nothing really changes at the Rüsselsheim -based auto manufacturer and it remains part of GM. But in reality, this decision to make no formal change would be fundamental. The prosperity -- or not -- of the German car company will be based on decisions made by the administration in Washington."

Business daily Handelsblatt writes:

"This industrial-political thriller has become a real problem for Chancellor Angela Merkel and her SPD-challenger, Frank-Walter Steinmeier. What happens if GM actually decides against Magna? And it doesn't really matter whether that is due to skepticism about Magna's Russian partner, Sberbank, or for another reasons.

"According to current Bundestag logic, this can only result in Opel's insolvency. And this would happen right in the middle of the most heated period in the election campaign. Not a good look for Merkel and Steinmeier who have made this issue an important part of both of the election.

"So who would be affected more if everything goes horribly wrong? A few weeks ago the answer was clear. Steinmeier had come out strongly for Magna early on. But in the meantime, things have changed substantially. The Chancellor herself has made it her cause. In spite of early reservations expressed by her economics minister, Merkel has become more of a supporter of Magna every week -- and she has made this clear to her US allies. If the deal destructs, then she will be the one disgraced. And the opposition parties -- including Merkel's preferred future coalition partner, the left-wing FDP -- are already sharpening their knives.

"Which is why pressure on the US administration has been increased this weekend. It has been made clear, through all possible channels, how seriously the German government is taking this."

The Financial Times Deutschland writes:

"Anyone who has ever done any negotiating knows how important it is to have a Plan B. When all else fails, those other alternatives can be used to pressure --or perhaps surprise -- the other party. But in Opel's case the German government has no Plan B. Early on, they set their hearts on one bidder -- even though experts have expressed doubts about Magna's plans for Opel ever since.

"No other option -- selling Opel to RHJ International or insolvency for Opel -- has been considered. The German government is stuck in a trap. GM has more options then them. And, above all, GM has time. GM's managers can relax -- they could sit back and wait for the Germans to offer more taxpayer money, or they could consider the RHJ International offer more carefully. Or they could just wait for Opel to become insolvent. But the German government desperately wants this matter resolved -- no matter what it costs.

"Acting like this, the German politicians are risking not just a bigger burden on the German taxpayer, they are also risking increased tensions in foreign policy. The decision impacts on other countries too -- Great Britain, Poland and Spain -- and it will have a particularly big impact on GM's major shareholder, the US. To endanger German foreign policy for the sake of an Austrian-Canadian company with Russian partners is just reckless."

Conservative Frankfurter Allgemeine Zeitung writes:

"You can imagine the dismay in Berlin when GM's supervisory board decided to delay its decision. Now there will be some foreign policy issues to address. Why is the Chancellor going into this guns blazing, without so much as a thought for tricky issues like monopolistic behavior and the risk of defaults on state loans? Is the position of Dieter Althaus (editor's note: the governor of the eastern German state of Thuringia and a member of Merkel's Christian Democrats, who faces a regional election on Sunday) at so much risk that he cannot survive without some good news about the Opel factory in Eisenach, Thuringia, this week? Or were promises of a different dimension altogether made to the Russians? This pressure the Chancellor is putting on simply raises a lot of questions. And most of them are going unanswered. "

Cathrin Schaer


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