Felix Salmon

The Opel saga

By Felix Salmon
September 2, 2009

A team of seven Spiegel staffers has produced a spectacular account of the big M&A story you’re probably vaguely aware of and find far too complicated to understand — the attempted sale of GM’s European car division, Opel. There’s lots of great stuff here, such as the games of phone tag being played out at the highest levels of the German and US governments (including Angela Merkel, Tim Geithner, and even Hillary Clinton and Dmitry Medvedev); and the spectacular own-goals being scored by the German government (like appointing board members to the German-American trust overseeing the sale of Opel who disagreed fundamentally with the government’s own plans for the carmaker).

Then there’s the even more spectacular own-goal made by at least one bidder, RHJI:

The plan offered by private equity investor RHJI would have been less expensive. It only requires government assistance to the tune of €3.8 billion.

However the fact that Magna was chosen in the end was a consequence of more than just political lobbying. It was also a result of a lack of tact on the part of RHJI representatives at a meeting in the Chancellery.

When Merkel asked Magna CEO Siegfried Wolf why he wanted to take over Opel, he said he believed in the company, in the future of the automobile market, and the value of the Opel brand. Merkel liked that.

Then she asked RHJI CEO Leonard Fischer why he was interested in Opel. The former investment banker answered very matter-of-factly that it was because the German government was assuming the risk. Merkel liked that less.

At this point, the chances of a deal being done before the German elections on September 27 seem to be negligible. After that, the political will behind bailing out Opel might well dissipate, to no particular sadness in Detroit, where important GM board members are asking why Opel need be sold at all. The most likely scenario could well be, now, that no deal will be done at all, and all the high-level politicking will be ultimately for naught.

(Via Hasselback)

5 comments so far | RSS Comments RSS

Too bad for Merkel…she could really use those 25,000 votes.

Posted by Pietro | Report as abusive

Does the Spiegel suggesting this is the reason Germany prefers Magna make it so?

Magna is preferred, as the German authorities have already openly admitted (and the union representatives even more so), because it forces control of Opel from GM and the US. If this had anything to do with long-term interests or viability, as reported in Germany, RHJ would be preferred. Spiegel have also run an article where they report the Spanish factories run at around half the cost of those in Germany (and Zaragoza production would be shifted Eisienach under the Magna plan), with the Polish factories running at less than a quarter of the cost. If this had anything to do with viability, the RHJ plan would be preferred, as the number of jobs slashed are the same, but the RHJ cuts would bring Opel around by concentrating cuts a little more on non-viable factories in Germany. Another important difference is that the Magna plan rests entirely on the Russian market which has fallen by over 50% this year!

Is the 1.5 billion loan even legal? Arcandor and Porsche were earlier denied loans from the German government, as these would breach the EU treaties, since the problems at these companies pre-date this economic crisis. However Opel hasn’t been profitable for donkeys years, and its problems easily predate this crisis. How is it then that this aid isn’t illegal?

Posted by Fritz | Report as abusive

Not really. The big point for the Germans at this point is kicking the Americans out of Opel. Which if you think about it, conforms with their long-term industrial strategy (killing GM for good is pretty much a good thing for every European country), and at the end of day, they are sick and tired of having some second-tier company run by a bunch of idiots out of the American Midwest running the show in Germany.

What they did with Hypo Real Estate they can do with GM; essentially force the GM to sell no matter they like it or not. And if zu Guttenberg has anything to do with this, he would surely force them to sell.

Posted by jvriebeeck | Report as abusive

Opel is a cash-suck, and the German auto-unions want to run it with the support of the German gov’t ($$). I don’t really know why either of the bidders would actually want Opel, honestly. I drove one top Opel model from Marseilles to Venice last summer… nothing special, lacked some guts going uphill at 130km/h. But it did go 750km (i.e. the full one-way trip) on a 50L tank. Of course, that tank cost 80 Euros, or ~ $115USD. But I digress… I would’ve been much happier in a BMW or Peugeot honestly.

Posted by the Shah | Report as abusive

Zu Guttenberg is about the only person in Germany to have admitted, though only briefly (he has been forced to change his music since then), that the Magna plan makes no sense and insolvency may be the only viable option. WSJ has reported that GM, besides putting in a billion euros of its own, has apparently been offered loans for another billion from UK, Span and Poland. If, as Spiegel reported, it is true that the German factories cost twice as much as those in Spain, and over four times as much as the factory in Poland, the only way to return to profitability is to close all the factories in Germany. Even if GM were to accept over 100 billion euros from Germany for Opel (as in Hypo Re), this money would simply go down the drain since the German factories are the cause of the problem in the first place. To this one should add the hostility faced by the German government and especially the trade unions.

Posted by Fritz | Report as abusive

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