Schaeffler/Conti feud puts Schroeder back on stage

By Paul Taylor
August 10, 2009

schroeder1Gerhard Schroeder is back at centre-stage, seven weeks before Germany’s general election. A corporate feud between industrial holding group Schaeffler and car parts maker Continental AG has given the former chancellor the chance for a comeback as the workers’ champion, although he no longer holds public office.

When Schaeffler, the biggest family-owned industrial company in Germany, bought control of Conti last August, the two sides appointed Schroeder as guarantor of the interests of Continental and its workforce, shareholders and other stakeholders under an investors’ agreement.

With the new owners now trying to oust Conti CEO Karl-Thomas Neumann, the former chancellor has used his powers to demand information from Schaeffler – and take legal action if necessary — to enforce compliance with the pact. Neumann’s sin is to have proposed a share issue that would dilute Schaeffler’s control.

A published summary of the shareholders’ agreement does not explicitly bar Schaeffler from seeking to remove Conti’s CEO, but it commits the owners “to support the ongoing strategy and business policies of the Executive Board”.

Latest reports on Monday suggested Schaeffler was seeking a compromise in which both Continental chairman Rolf Koerfer, a Schaeffler loyalist, and Neumann would go — as would the disputed share issue — to avert a showdown at a Conti supervisory board meeting on Wednesday.

Schroeder’s cameo role has political overtones. It looks like part of a strategy by the Social Democrats (SPD), junior partners in an uneasy coalition with the conservative Christian Democrats (CDU/CSU), to paint themselves as the true defenders of German jobs and companies against predatory Big Finance.

The SPD is trailing far behind the CDU/CSU in opinion polls, with about 23 percent compared to 36 percent for Chancellor Angela Merkel’s conservatives.

Schroeder ran a strong catch-up campaign at the last general election to bring his party within a whisker of the CDU/CSU by casting Merkel as an economic neo-liberal in thrall to an ivory-tower adviser — “the professor from Heidelberg” – who recommended radical tax cuts. But his own image was tarnished when he joined the payroll of Russian gas monopolist Gazprom <GAZP.MM> just months after leaving office, to promote a disputed sub-Baltic gas pipeline.

This time, the SPD’s campaign strategy is to depict Merkel as a dithering, absentee chancellor — she has been on a hiking holiday in Austria — while German industry, battered by crisis, is left to the mercy of hedge funds and the super-rich.

The SPD has campaigned vociferously against a bid by Belgium-based financial investor RHJ, one of the bidders to take over carmaker Opel, the German unit of fallen U.S. auto giant General Motors.    Marie-Elisabeth Schaeffler and her son Georg Schaeffler, heirs to the family business and both listed by Forbes magazine as billionaires, fit neatly into this rogues’ gallery of financial capitalism.

Whether the SPD strategy will work this time looks highly uncertain. The pro-market centre-right Free Democrats (FDP), Merkel’s preferred coalition partners, are riding high in the polls, as is CSU Economics Minister Karl-Theodor von Guttenberg, who opposed the state bail-out of Opel. The SPD has sought unsuccessfully to demonise the dashing young minister a neo-liberal “baron from Bavaria”.

The results of June’s European Parliament election suggest German voters prefer a safe pair of conservative hands in the financial crisis to the rhetoric of class struggle.

In the end, it is not Schroeder but the banks, which have lent huge sums to both companies, that will have the most say in how things are settled. 

That leaves Schroeder with little more than a walk-on part in this industrial drama.

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