Blog: Dave LeggettState aid for Opel gets politically messy

Dave Leggett | 14 June 2010

The political backdrop to Opel's request for German government loan guarantees to help it finance its restructuring of European operations is messy – to say the least - on multiple levels.

This time last year GM was in Chapter 11 in the US and the firm's European operations were heading for divestment to either a Magna-led consortium or an American-based private equity firm called RHJ. The German government was strongly backing the Magna proposal which appeared likely to protect more jobs in Germany. State aid was, it was made clear, being lined up to underwrite restructuring under the Magna consortium (which also included Russian bank Sberbank).

But then the EU competition people started asking awkward questions about the fairness of the bidding process vis a vis state aid at the same time as GM's leaders concluded that it would actually be better to hang on to Opel/Vauxhall after all. The Magna deal was suddenly off and the German government was not at all happy with the outcome, though still mindful of the large number of Opel jobs in Germany. In fact, the German government  - with a general election coming up - was little short of furious with GM's volte face.

Fast forward to this year and 'New GM' has chalked up a quarterly profit and trumpeted the early repayment of loans to the US and Canadian governments. Advisers have even been appointed to start looking at a GM IPO. New GM appears to be a US-led but international company that has been brought back from the brink and, in the eyes of many, should be able to manage its own affairs. 

As far as German domestic politics goes, there appear to be significant tensions within the coalition government there that have not helped. And in Europe generally there is the still looming eurozone fiscal crisis and Germany's role at the heart of bailout plans as a donor to countries seen as fiscally irresponsible – unlike Germany.

Now is perhaps not the best time to be asking for state aid from Berlin and the company doing the asking is the one that provoked such ire last year.

Having said all of that, cooler heads will be counselling the politicians in Germany over the high stakes concerning Opel. Opel is important to the German economy. A way will likely be found to eventually get Opel the loan guarantees that it needs.

But it's a messy political saga that isn't being enjoyed by anyone – least of all Opel/Vauxhall's workers. And you can understand why Opel/Vauxhall's CEO Nick Reilly is frustrated with the situation. He wants to get on with the restructuring plan, but it's the underlying politics that seem to be the problem. And he can't do much about that.

HOT TOPIC: Opel government assistance decision disappoints


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