Out of near ruin, Opel/GM Europe (including UK's Vauxhall) has become a hot property. Just last April, GM pledged billions of euros to shore up Opel's eroding market share, then in November announced major job cuts in Europe as GM worldwide slid toward bankruptcy. Now Angela Merkel, Barack Obama, Vladimir Putin, and sundry transatlantic bureaucrats have forged a tentative deal for Canadian/Austrian autoparts-maker Magna, and its Russian ally Sberbank, to buy Opel, backed by German loans and guarantees.
These loans and guarantees are officially called "bridge loans" aimed at getting the new combined Magna-Opel venture off the ground, but no one really knows when or if they will be paid back. Their main purpose is to keep Opel's employees across Europe - most especially in Germany - on the job and protected from the consequences of papa GM's looming bankruptcy. Indeed the whole deal seems a protection racket: protect GM Europe from genuine competition, protect Opel workers from job loss, protect GM from market forces generally, and protect politicians-elections are looming-from feeling the wrath of the disgruntled voter.
Magna isn't in the car-manufacturing business, but it plans to "work together" with Russia's Gaz to build cars in Russia and Eastern Europe, which implies not just holding on to the old Opel jobs, but expanding capacity. As German Chancellor Angela Merkel puts it: "It's about creating a European company under the umbrella of Adam Opel."
Is there demand for that capacity? It is one of the very interesting questions no one seems to have asked. Indeed, if GM and Opel were entering genuine bankruptcies, the only objective here would have been to get maximum value for the Opel assets, even if it meant stopping production. Short-term job losses would be seen, rightly, as a political rather than economic concern. As it transpires, both the US and Europe (but more so in Europe) are more concerned with avoiding political pain from job cuts and asserting state control over the auto industries, which will also boost long-standing "green" objectives of retooling cars for lower carbon emissions.
For Germany's Economic Minister, Karl-Theodor zu Guttenberg, this is a bit too much. Alone among politicians, and seemingly against every politician's instinct to put the next election ahead of what's good for country, he preferred structured insolvency more than a badly structured "rescue operation". His resistance to a quick-and-dirty deal for Opel, and particularly to the prospect of a permanent state position in the new Magna-Opel conglomerate, allegedly led to him offering his resignation. Instead, Chancellor Merkel - rightly - praised his management of the Opel negotiations, and indeed zu Guttenberg's resistance led to improved offers from both Magna and Fiat, the chief rival bidder. As he told Welt am Sonntag, "the state can be blackmailed if it is overly generous with help even once."
Yet both Europe and the US seem well beyond that point. GM's forced bankruptcy will leave the Obama administration with over 60 per cent control, and Germany's financial backing leaves it in a position of power over Magna-Opel. At the same time, GM retains 35 per cent of Opel, most of its patents (many of which originate with Opel, but which "new Opel" must pay for), and a veto over Opel's entry into the Chinese market. Whether these new combinations have long- or short-term economic viability is beside the point. Merkel couldn't stomach major job losses at Opel just before the election, and rival Fiat could not agree with GM's demands to maintain a share in Opel.
This is not likely the end of the story. Fiat still has its eye on a broad transatlantic manufacturing platform, and the Obama administration, which pushed Fiat's Chrysler takeover, seems sympathetic. If the Magna-Opel deal fails, after all (in which case the 1.5 billion euro loan from Germany will be irretrievably lost), or falters and the price gets too high for even Merkel, Fiat could yet step in (after the election, of course). What is truly astonishing about all this is not the election-year politics, or the impulse to save jobs at all costs - it is the blithe and unchallenged assumption that major industrial concerns are the custody of the state, and can be sliced-and-diced at will by collusion among heads of state.
Following the economic crisis, free markets themselves are at stake. So are long-held European values such as using competition policy to level the playing field. The Angela Merkel who told the Davos Forum that "we must not allow market forces to be completely distorted. For instance, I am very wary of seeing subsidies injected into the US auto industry. That could lead to distortion and protectionism," has vanished. So has the Neelie Kroes who, last November, demanded resistance to "calls, particularly in France, Germany and the United States, for support to be given to the car industry." Watch what they do, not what they say.
George A. Pieler is former Deputy Counsel to Senate Majority Leader Bob Dole. Jens F. Laurson is Editor-in-Chief of the International Affairs Forum.
Related Matierals from the Atlantic Community:
- Florian Kuhne: Is Western Civilisation in a State of Decline?
- Matthias Stephan Fifka: The European Union on the Way to Hell?
- Christoph Suess: As the Wheels Fall of GM, Opel Goes it Alone
- 3
