SPACE KADDETTS?

11/7/09

In the seemingly endless soap opera that GM’s Hamlet portrayal on Opel has become, the latest development is that GM will now keep Opel to maintain its European presence. Apparently, GM has decided that keeping Opel would be cheaper than making Chevy an international brand and that, apparently, since happy days are here again, courtesy of plenty of taxpayer cash and assurances from cerebral economists that the “recession” is behind us, the time for hard choices has passed. Keeping Opel is not a done deal; European governments, primarily those of Germany, Great Britain, Spain, and Poland, must provide financing for an Opel restructuring roughly equivalent to the financing they were willing to provide for the Magna/Sberbank deal. GM claims, however, that it if the Europeans don’t want to play ball, it can use its own (read “your”) liquidity for the deal. There is also the matter of the outstanding bridge loan Germany extended to GM contingent on the Magna/Sberbank deal getting done. GM assures us that it is paying off that loan, again with your money.

Assuming that the financing gets done, and it may not, given that such financing may be contingent on labor concessions the General may not be willing to make, GM will keep Opel. Is this a good idea? Those who think so cite the 1981 Chrysler bailout. Back then, the federal government made the rescue contingent on Chrysler effectively divesting its overseas operations. This made Chrysler a regional (i.e., North American) car company, which no doubt has inhibited its continuing struggle for survival since then. Making GM get rid of Opel would have the same consequences for GM, the argument goes. This is nonsense. Losing Opel would not eliminate GM’s global presence. The overseas presence that really matters to GM is its presence in China, where it is the largest foreign car manufacturer. GM knows this; its international headquarters are in Shanghai, not, say, Berlin, Madrid, London, or Warsaw. Yes, Europe is a large and important market and should remain so. But the market of the future is China. Divesting itself of Opel would have no impact on GM’s presence in China, or anywhere in Asia for that matter. So the “let GM keep Opel or the General becomes Chrysler” argument makes little sense.

Besides, GM produces some great cars, yet another distinction between it and Chrysler.