Exhaust fumes

GM/Opel: It’s the best idea that’s come up so far about Opel. Keep it in the house. The troubled European division of General Motors was put on the block earlier this year when its parent company’s own future was in doubt. Since then the skies have cleared somewhat, with the US government taking over GM after a swift bankruptcy. After three months of protracted negotiations, GM doesn’t seem happy with any of the potential buyers’ terms. One reason is that it wants to keep strong industrial and technological ties to Opel. So why not go back to the drawing board, and keep the division?

 

The problem with this nice scenario is that it omits the 300-pound gorilla monitoring the proceedings: Germany, home to about half of Opel’s workforce. Angela Merkel’s government has pledged support to Opel – some E3 billion of financial guarantees. It also extended the company a bridge loan of E1.5 billion last May when GM entered into talks with Magna International, the Canadian car parts maker. But GM and Magna still haven’t come to an agreement, and the German government is frowning on other suitors.

The Magna bid is largely financed by Sberbank, Russia’s largest bank, which has ties to ailing Russian car manufacturer Gaz. GM’s board is balking both at technology transfers to Russia and possible future competition from Opel on the Russian market. Germany, on the other hand, is favouring the Magna bid because it would save more jobs than competing offers.

Whatever the outcome of the talks, it’s hard to see how GM could afford to antagonize Germany’s government and unions while keeping its hat in hand for public money. The US group has already ruffled German feathers by not settling the Opel crisis sooner. Germany’s general elections will be held September 27, and Angela Merkel wants to be able to show voters some kind of long-term solution to Opel’s woes. It may be that by dangling yet another solution to the problem, GM simply wants to extract better terms from Magna. But the US group may also be playing with fire.