Thursday, November 5, 2009
By Joe Brown
Without full details or even a reasonable explanation from General Motors Automotive, many people are scratching their heads as to why the all-but-signed deal to sell their subsidiary, Opel to parts-maker Magna, fell through.
Was it driven by the report that came out today stating October was the carmaker’s best year over year in a long time? I hope not. Regardless of the dynamics of the decision, I think this will go down as a key lesson in future business textbooks and case studies about the dangers of mixing Wall Street with Capitol Hill.
At this moment, our friends in Germany fall somewhere between annoyed and completely miffed. The thought–at least according to German workers–is that GM will likely make more cuts than Opel would have. Further, officials orchestrated a “bridge loan” to ensure Opel’s solvency while a buyer was found which they thought was finalized when Magna’s aspirations to become an even bigger player than it already was.
My concern lies with the solid relationship America had fostered with Germany may be strained slightly. The U.S. government is now the majority owner of GM (although they immediately issued a statement attempting to wash their hands of having any input in the decision) and their close ally is Germany’s Chancellor, Angela Merkel.
The Chancellor and her cabinet had strongly supported and worked feverishly on doing whatever it took to make this deal happen. Now, her office felt completely blindsided by this and I bet only stronger and more critical comments will be out from them in the coming days. One official from Merkel’s office stated that she is considering a call to President Obama to voice her displeasure.
“After many promises and months of negotiations, GM has left workers out in the cold. This attitude from General Motors shows the ugly face of turbo capitalism. It is completely unacceptable,” according to the Chancellor’s deputy leader, Juergen Ruettgers.
True to the old adage, you can’t please them all; the US finds itself smack in the middle of a situation they probably didn’t realize before becoming a majority shareholder of a giant company. Even Russia–strong supporters of the Opel-Magna deal–released a statement from Prime Minister Vladimir Putin’s office calling the decision, “absolutely astonishing.”
I worry that it may be difficult for our government to save face despite the best public relations money can buy stating they had no influence on this decision (which I do believe) yet they are technically the majority owner of the company. When’s the last time you heard of a group with a controlling interest (51 %+) in an organization not have any influence on a decision of this magnitude? It just doesn’t happen and is quite the conundrum.
Now, GM execs are scrambling to update a new restructuring plan for Opel and Vauxhall.