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GM and Germany in Opel chicken run

August 5, 2009

USA   By Alexander Smith and Paul Taylor

General Motors and the German government are playing out the Chicken Run scene from the 1950s James Dean classic film “Rebel Without a Cause”.
    Neither has leapt from their car yet, but there are growing signals from Germany that GM has its hand on the door handle and is preparing to drop its preference for financial investor RHJ in favour of handing control of Opel to Canadian auto parts maker Magna.
    GM has so far been in no hurry — although the U.S. car group has been doing its best to keep up appearances with a statement following this week’s board meeting saying it hoped to make a recommendation to the Opel Trust Board “shortly”. But German pressure has been rising as a Sept. 27 general election approaches.
    Germany’s eagerness to seal a deal with Magna — which has teamed up with Russian bidding partner Sberbank and automaker GAZ — is palpable.
    Berlin is ready to get its cheque book out to provide state aid for a deal with Magna. But has made clear this would be reconsidered if GM opted for Belgian-based RHJ, which Chancellor Angela Merkel’s government fears would cut more jobs. RHJ would be an unpopular choice in Germany, where a leading politician famously branded private equity buyers “locusts”.
    Berlin wants a deal closed in September and has set up an Opel Task Force to oil the wheels. Yet Opel workers are concerned that GM has been playing for time so that a decision is delayed until after the election.
    They fear that stalling until after polling day would make it easier for GM to put Opel through insolvency proceedings and shed some of its factories and staff at a lower cost.
    For Merkel, a deal on Opel’s future now would deprive her Social Democratic junior partners and rivals, who back Magna, of a potentially damaging campaign issue (“Merkel dithers while Opel burns”). But while it may yield short-term benefits, Berlin’s rush to hand Opel to Magna could yet backfire.
    GM’s chief negotiator John Smith has been vocal in his criticism of Magna’s bid, specifically citing concerns about the use of GM patents and Russian expansion plans.
    Magna’s Kremlin-backed partners operate in an opaque business environment where foreign players can suddenly lose control of a joint venture or face tax or regulatory obstacles.
    It may well be GM that blinks in the run-in with Berlin over Opel, but Merkel shouldn’t forget that whoever bails out first, the Chicken Run inevitably ends in a car wreck.

Comments

The German government appears to be driven by its strange attraction to Russia and the belief that Russia will help to bail out Opel jobs in Germany. They are deluded: once the Russians grabbed the technology they want to set up their own Opel factory, they will cut loose the German operations. Magna will be in for a wild rodeo ride through all this and may well end up in the dust itself.

Posted by greg | Report as abusive
 

The Germans have one goal in mind: do what is good for Germany. Even if it drives the company into the ground, or (as in this case) forces the company to make a terrible business decision like hand its brands and intellectual property to a competitor, the Germans don’t care. They dont care about Belgium, they dont care about Spain, they dont care about Britain.

Posted by skip | Report as abusive
 

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