Posted on 05/27/2009 1:34:40 AM PDT by bruinbirdman
German politicians entrusted with the fate of General Motors' Opel business need to show their mettle and set politics aside.
The European autos market must shed capacity to preserve Opel's long-term viability in manufacturing mass-market cars. Based on the limited available details on the proposed bids for GM's European subsidiary, Fiat's proposed merger best ensures this path. Though that may mean more job cuts, legislators should support it.
Angela Merkel, the German premier, is in a tight spot. The US government deadline for GM to restructure or enter bankruptcy is June 1. Germany must decide before then whether to leave Opel's future in the hands of US bankruptcy proceedings or agree to finance one of its three suitors - Fiat of Italy, Canada's Magna or investment group RJH. At the same time, national and European elections are looming.
Stomaching job cuts in an election year is tough. So choosing between Fiat and Magna might seem a no brainer. Magna's reported offer of limited reduction of Opel's 25,000 headcount and a capital injection of 700m euros (£614m) is more politically appealing than Fiat's zero-cash offer and 10,000 job cuts across Europe.
But the European car industry's terminal problem is 30pc-40pc overcapacity. It's not immediately obvious how a sale to Magna would reduce that. The European car market has declined 16pc in the first four months of the year. The push into Russia that Magna pledges cannot meaningfully offset this decline. The risk in choosing Magna is that Opel stays a substandard auto business sucking up domestic market share.
The plan proposed by Sergio Marchionne, Fiat's boss, is risky and audacious. Fiat is already occupied with Chrysler. Converting the US carmaker's manufacturing and distribution platforms to churn out Fiats may well take at least five years. A merger of Opel and Fiat
(Excerpt) Read more at telegraph.co.uk ...
Fiat-Chrysler-Opel? That’s as surreal as Taco Bell being the only restaurant to survive the Franchise Wars.
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