The Great Debate UK
Political and economic logic are set to collide in the byzantine decision-making over the future of German carmaker Opel, the main European arm of fallen U.S. auto giant General Motors.
If politics prevail, as seems likely, the cost to German taxpayers will be higher and the chances of commercial success lower.
The aim of the Berlin government and four federal states, which are sustaining Opel with bridging finance, is to save as many German jobs and production sites as possible. That makes political sense ahead of September's general election. But the business logic is that only a greatly slimmed-down Opel can survive in an industry with chronic overcapacity.
In theory, it is up to GM's board to choose among the three offers it expected to receive on Monday from Canadian-Austrian car parts maker Magna <MGa.TO>, Belgian financial investor RHJ <RJHI.BR>, and, less plausibly, Chinese state-owned auto maker BAIC. But there are several other powerful players with a say. They include the trustees responsible for the company since GM entered U.S. bankruptcy in June, the German federal and state governments, Opel's works council and, last but not least, the European Commission, which must approve the restructuring plan as a condition for authorising the state aid.
The German authorities and Opel's workforce prefer Magna's bid, which is backed by Russia's Sberbank <SBER03.MM> and automaker GAZ. The strategy is to seek growth in the dynamic but volatile Russian market. Magna requires the most state aid -- 4.5 billion euros -- but has pledged to keep all German production sites and cut 10,000 of the 50,000 workforce across Europe, of which just 2,500 would go in Germany. GM Europe also assembles Opels in Belgium, Spain and Poland, and in Britain under the Vauxhall marque.
GM management is thought to prefer RHJ because its offer includes a buy-back clause that could put Detroit back in the driver's seat after three years in which Opel would be shrunk. RHJ wants less state aid -- 3.8 billion euros -- and plans a similar number of job cuts. However, the make-up of those cuts would be unpalatable to the Germans: it plans to shrink the plant at Bochum and idle that in Eisenach until 2012.
from The Great Debate:
Germany's politicians seem to have rescued their bad bank. Pushing back the valuation date for toxic assets to before the Lehman collapse has made it more likely that banks will consign their dud investments to the voluntary scheme.
It had looked as if the banks might simply boycott it. However, while the government has scored a political goal, it is no closer to its aim of boosting lending to a credit-starved German economy.
The essence of the scheme is that banks will be able to transfer some 250 billion euros of toxic assets into "eine Bad Bank". In exchange they receive government-backed paper that they can count towards regulatory capital.
from The Great Debate:
Higher taxes? Lower public spending? Devaluation? Inflation? Investment in green growth?
European governments are pointing in very different directions as they debate an exit strategy from the global financial crisis. Despite European Union efforts to coordinate economic policy, there are clear signs that the main European economies will charge off in disarray towards separate exits.
Professor David Bailey works at the Coventry University Business School and has written extensively on globalisation, economic restructuring and industrial policy, with particular reference to the auto industry. The opinions expressed are his own. -
Recent comments by Tom Purves, Chief Executive of the British based but German-owned luxury car firm Rolls-Royce, struck me as interesting on a number of levels this week.
- Nick Hewitt is a historian in the Department of Research and Information at the Imperial War Museum in London. He studied history at Lancaster University and War Studies at King’s College, University of London, where he specialised in naval history. He joined the Imperial War Museum in 1995. The opinions expresed are his own.-
“D-Day at last! Invasion! Hurrah! God save the King!” wrote a Cheshire schoolgirl on the evening of 6 June 1944. For her, news of the successful D-Day landings clearly meant a great deal. But looking back after sixty-five years, what was the historical significance of D-Day?
Arcandor’s chief Executive Karl-Gerhard Eick has warned that if his department store group is forced into insolvency, it will do to the retail sector what the collapse of Lehman Brothers did to finance. It is hard to know whether Eick really believes this, although one has to hope he does not.
A revisionist theory on the causes of the global financial crisis blames surplus countries like China, Japan and Germany as much as highly-leveraged, deregulated finance in the United States and Britain.
Germany is becalmed by a political and economic phoney war five months before this year’s most important European general election. But a lack of real economic debate now risks prolonging the political stalemate and delaying much needed reforms.
LONDON/PARIS, April 23 (Reuters) – Germany is to set up a system of bad banks before the summer recess to hold some 250 billion euros of toxic assets. Finance Minister Peer Steinbruek has assured taxpayers that his solution — called “eine Bad Bank” (there is no German word for the concept) — will not weigh on the budget.
from The Great Debate:
The United States is fighting a fire in the world economy, but Germany and some other European countries fear a flood of inflation as a result.
That clash of cultures is at the heart of transatlantic debate over whether Europe should spend more and ease monetary policy to revive growth, with a deep economic contraction certain this year and an end to the recession not yet in sight.