GM Subsidiary Under the Gun Should Germany Save Opel?
The economic crisis in Germany has reached a new dimension as the government in Berlin debates how to help ailing carmaker Opel. Will loan guarantees suffice, or will it need to partially nationalize the brand? It's an issue that could end up shaking the country's economic system to its core.
Jürgen Rüttgers, the conservative governor of the German state of North Rhine-Westphalia, has always liked to refer to himself as a "labor leader". He wears good suits and is a loyal member of Chancellor Angela Merkel's Christian Democrats, but he regularly comes out with proposals for helping the poor, too.
Workers at Opel's plant in Rüsselsheim push the new model "Insignia" from the production line.
If state loan guarantees aren't enough to rescue Opel, the government will have to take a stake in the carmaker, Rüttgers said, even before he took off.
Ever since GM CEO Rick Wagoner announced plans last week to cut 47,000 jobs worldwide and to close more than a dozen plants, politicians have been proposing ways to rescue the global carmaker hopelessly indebted with 70 billion ($89.3 billion) in liabilities.
It almost seems as though the global economic crisis has reached a new level. The restlessness is mounting, the risks are becoming more tangible. Wagoner left no doubt that he expects aid from the German government. And what will happen if that aid isn't forthcoming? What will happen to GM, to Opel, to the plants in Germany?
Flattery and 'Blackmail'
These were the issues Rüttgers discussed with Wagoner, who was at pains to praise the German Opel plants with their innovativeness and their hard-working employees. His tone was flattering and enticing. He spoke not like a corporate killer but like a shrewd salesman.
Some 29,000 jobs are at stake at Opel's four plants in Germany.
"Never before has the public been confronted with such bare-faced blackmail," conservative daily Frankfurter Allgemeine Zeitung commented the next day.
Rüttgers flew back to Germany both relieved and unsettled: relieved because there won't be massive job cuts for the time being and the Germans are to cooperate on a restructuring plan for GM's European operations. But unsettled because the government may be taking on more than it can handle in this crisis.
Opel Brand Evokes Germany's 'Economic Miracle'
Rüttgers said he had always been opposed to nationalization, and insisted last week that "the state isn't a good businessman." But it looks as if this role may be forced on him.
The crisis has reached the industrial core of Germany by endangering an auto manufacturer that remains deeply German even though it has a US parent company. The Opel brand symbolizes the solidity of the bourgeois 1950s, it evokes a sense of family as well as the economic miracle, which means that in some way it's part of the foundations of the German economy.
These days, some laugh at the brand because it hasn't manage to shake off its somewhat staid image, but virtually every German family has an Opel in its photo album at least.
And that's why there's more at stake with Opel than its 29,000 jobs at four plants in Eisenach, Kaiserlautern, Bochum and Rüsselsheim. This is also an emotional issue. Even Germans who would never drive an Opel can't imagine Germany without it.
But beyond symbolism, the debate about Opel's future is also about the future of the German economy. At what point in this crisis will the economy cease to be a market economy? So much is in flux at the moment that even fundamental principles are suddenly being called into question.
Firms Lining up for Help
Opel is only one case among many. The crisis has engulfed every area of the economy. Barely a day goes by without companies appealing for federal or regional government aid: car components supplier Schaeffler, porcelain manufacturer Rosenthal, chip factory Qimonda.
Opel is deeply intertwined in GM's global operations.
Nevertheless, politicians in Berlin and the provinces are increasingly portraying themselves as corporate saviors. "These won't remain individual cases," says Patrick Adenauer, head of the Association of Family-Owned Businesses. "This could cause a conflagration."
Never before since World War II has the German federal government had to intervene in the economy to such an extent. The new German Economy Fund totals 100 billion and is aimed at helping the private economy with a mixture of credit guarantees and direct loans. The two economic stimulus programs already approved by the government total 61 billion and are aimed at reviving a broad array of business ranging from road haulage firms to car dealerships.
But is the government capable of steering the economy properly or is it taking on too much responsibility?
It's clear that if the government comes to Opel's rescue, it won't be able to deny help to other companies. And it may overstretch itself. In the past, politicians and civil servants have rarely been good at running businesses. On the contrary, as the fate of the publicly-owned Landesbanken regional banks shows: they all got into trouble with risky speculation deals.
Rüttgers is skeptical about the government taking a stake in Opel. Roland Koch and Kurt Beck, the governors of Hesse and Rhineland-Palatinate which are also home to major Opel plants, have been watching the public debate with a mixture of irritation and helplessness. They weren't happy when Rüttgers mentioned the possibility of a government stake of his own accord before he had even arrived in the US.
- Part 1: Should Germany Save Opel?
- Part 2: Government Stake Seen as Last Resort