Blog: Dave LeggettOpel - it's a cliffhanger

Dave Leggett | 27 May 2009

Which way is the wind blowing on the three bids (I think we can probably discount the late entry from BAIC) for Opel? Industrial logic points to Fiat. I have said that already and I don't think much has changed. But the political backdrop in Germany complicates things. Magna's bid has won considerable support; the Russian element is intriguing, but is being involved with a Russian bank and virtually insolvent GAZ a good move?

Fiat's bid is perhaps too honest for its own good. Marchionne has talked openly about a need for restructuring and that has provided ammunition for opponents and rival bids. If Fiat is having to amend its offer by making too many concessions on plant closures and job losses in Germany, it's actually losing some of the rationale behind its bid.

Fiat can add value to a reformed company in a merger by consolidating production capacity and removing overlap on product engineering. The question on the Fiat side is to what extent the Fiat team is prepared to water those future gains down in the interest of doing a deal that they see as essential for Fiat's survival, too.

For the German government there's a political calculation to be made balanced with more long-term considerations. I'd guess there can be a meeting in the middle, although I wouldn't underestimate the force of short-term political expediency when elections are looming.

But there's apparently a new political reality here that is interesting. As with the bank bailouts, government now plays a significant role in supporting ailing manufacturing companies - globally. And if taxpayers' money is involved, the interests of capital providers tend to lose out to labour, especially in a recession and with unemployment likely to be rising for another year, despite the 'green shoots' that have revived stock markets in recent months. 

Government funds come with strings attached because there is necessarily accountability to taxpayers and voters. For multi-national companies that seek/need national government support, the waters are well and truly going to be muddied as the business case is, to some extent, diluted or changed by political realities.

GERMANY: Job concessions will undermine Fiat-Opel merger case – analyst


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