Someone very wise and Detroit-savvy once told me that when things seem to be going well at General Motors, just wait a few moments and things will turn sour. Well, yet again GM’s best-laid plans have gone awry: The European Commission’s antitrust boss is challenging Germany’s scheme to subsidize a consortium’s purchase of Opel. Frankly, GM’s not to blame for this snafu, which places Opel’s future in limbo. It’s the fault of Germany’s political and labor pooh-bahs (not to mention Russia’s political bosses) who pressured GM to sell Opel to auto supplier Magna International and its Russian partners.
The Germans argued Magna & Co. would preserve more jobs, and Berlin was poised to pump EUR4.5 billion into struggling Opel to make this happen. Not so fast, says EU competition commissioner Neelie Kroes, whose remit includes making sure European countries don’t use public funds to unfairly manipulate the commercial landscape. Indeed, a statement from Kroes says Germany needs to offer the same guaranteed subsidies to all Opel bidders, not just Magna, and let GM reconsider the offers. So, what’s next? If the EU kills the Magna-Opel deal, GM will have two viable choices: 1) Keep Opel and make a go of it, thereby preserving a European automotive footprint which would be lost in a sale. This is what GM’s board should have opted for in the first place, but directors were wary of a decision that would require a rejuvenating investment in Opel so soon after GM’s exit from bankruptcy protection; or 2) Sell Opel* to a willing buyer, whether Magna (again), or private equity firm RHJ International which lost out to Magna, or one of several Chinese entities eager to claim a well-known western brand. (*It’s worth noting that GM was going to sell 65% of Opel and keep the rest.) I would imagine GM’s leadership and board are enjoying a bit of Schadenfreude at Germany’s expense even as they mull their fresh dilemma.