The World from Berlin 'Tax Money Should Be Off-Limits for Opel'

General Motors wants European tax money in exchange for keeping the car maker Opel afloat. But GM has yet to come up with a convincing restructuring plan. German commentators on Thursday urge politicians not to open their wallets.
GM has guaranteed to keep Opel factories open. But for how long?

GM has guaranteed to keep Opel factories open. But for how long?

Foto: SEBASTIEN PIRLET/ REUTERS

Less than a month after pulling out of a German-brokered deal to sell Opel to Canadian autoparts manufacturer Magna and the Russian lender Sberbank, General Motors is back in Europe, and asking for government money to prop up its European operations. To sweeten the deal, GM hinted Wednesday that it would keep its four plants in Germany open.

While the factory doors may stay open, thousands of jobs will most certainly be lost, and Germany will take the brunt of the cuts. Speaking to reporters, Nick Reilly, temporary head of GM's European operations, said that 9,000 jobs would be axed across Europe, with up to 60 percent of the cuts coming in Germany. That amounts to a 20 percent reduction in capacity, which is to be accomplished through downsizing plants rather than closing them entirely.

Certainly Chancellor Angela Merkel and the German government will be pleased to hear the news that the local plants will remain in operation. Of GM's 50,000 workers in Europe, roughly half work in Germany. On Wednesday, Reilly said that Germany's plants in Bochum, Eisenach, Kaiserslautern and Antwerp play a critical role in GM's future.

But will that be enough for Germany to cough up the money GM needs? GM is asking EU governments to fork over most of the €3.3 billion ($4.9 billion) it says it requires to stay afloat. Germany had offered €4.5 billion to midwife the Magna deal, but once GM backed out, Berlin has become markedly more skeptical. GM has also not said how long plants in Germany will remain in operation.

German commentators on Thursday take a closer look.

The Financial Times Deutschland writes:

"In the hopes of getting state assistance from a number of governments, GM has made the same mini-cuts everywhere. That has less to do with economic efficiency and more to do with political calculation."

"The German government would do well to stay out of the Opel rescue. It should neither intervene on the behalf of individual factories nor should it send any money to GM. Opel is not a good candidate for assistance from the German Economic Fund (eds. note: a €115 billion fund to assist German companies ailing as a result of the financial crisis) because it doesn't meet the fund's stringent criteria. The car maker was not healthy before the financial crisis nor does GM currently have difficulties finding financing help. Even a tough restructuring problem would only lessen doubts about the survival prospects of Opel. It would not eliminate them."

The conservative daily Die Welt writes:

"Such announcements regarding job cuts are not worth much. They can be quickly changed should business not develop as expected.... They are primarily suitable for softening up government leaders. The message is: Give a few billion and things won't turn out quite so badly."

"Much is unclear in the case of Opel, but one thing is as plain as day: billions of state guarantees for Opel would be a very uncertain investment."

"Perhaps even worse would be the distortion of competition. Even now, one can imagine how the competition from the government-subsidized Opel models Astra and Insignia would make life difficult for Volkswagen, Daimler and others. When will politicians realize that their interventions produce far more costs than just the loss of billions in guarantees? If one looks at Opel's history, there is only one possible answer to the question: obviously never."

The center-right Frankfurter Allgemeine Zeitung writes:

"What will happen next? General Motors has sent Nick Reilly to Europe to guide Opel into the future, as part of the parent company. He has no solid plans, but he has a long list of requests -- for the German government, for the states where Opel plants are located and for the Opel employees. He wants them all to assist him with the restructuring of the car company -- with taxpayer money or by withholding demands for pay increases. And signals that some aid may actually be forthcoming are already being sent by the politicians, who only days ago were the victims of General Motor's deceit."

"'General Motors could also contribute,' Reilly has said. How very kind. Opel -- and the British subsidiary, Vauxhall -- belong to General Motors. They do not belong to the German or British taxpayers. One can wish the company luck -- but tax money should remain off-limits to Opel."

The center-left Süddeutsche Zeitung writes:

"For decades, GM lacked a clear plan and has had no clear strategy.... In June, for example, the company planned to close the Opel plants in Bochum and Eisenach. Today both of those plants have been guaranteed a future. This sort of back and forth doesn't exactly encourage trust. State governors need to be careful in dealing with these sorts of managers -- and they should refuse to support them financially. Otherwise they will simply trigger a cycle of subsidies that won't guarantee jobs anyway."

"No car manufacturer is in a position to guarantee jobs right now. The outlook for the auto industry, which continues to suffer from over supply, is simply too grim. In order to improve the industry's outlook, factories must close. As such, there is absolutely no reason to assist a company by giving them billions of euros, just so they can keep those excess factories working."

-- Christopher Lawton