Auto giant's decision to dispose of company 'warmly welcomed'

THE GERMAN government’s “patience, clarity and decisiveness” had paid off, chancellor Angela Merkel said yesterday as she “warmly…

THE GERMAN government’s “patience, clarity and decisiveness” had paid off, chancellor Angela Merkel said yesterday as she “warmly welcomed” General Motors’ decision to sell its European arm to Magna, the Canadian parts maker.

The decision of the GM board late on Wednesday came as a surprise for government officials. They had expected GM to hold on to Opel or to postpone its decision until after the election.

Berlin officials said they had been in the dark about the move until 1.25pm yesterday, when Fritz Henderson, GM’s chief executive, called Thomas de Maizière, Dr Merkel’s chief of staff, who then informed Peer Steinbrück, the finance minister, and Frank-Walter Steinmeier, the foreign minister.

German politicians and civil servants had complained for weeks about conflicting signals from GM and blamed them on conflicts between its management, which favoured a Magna sale, and its board of directors, which had a preference for retaining Opel.

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Berlin had agreed to back a restructuring of Opel with €4.5 billion in loans and credit guarantees, but only under Magna’s ownership.

One person familiar with the talks said: “It just took all this time for the GM board, which is pretty new and has a lot more on its plate than Opel, to get a measure of the real costs holding on to Opel would have entailed. There’s nothing more sinister than this.”

Another senior official said: “The board went through the same process management had gone through before. They had four scenarios last night, including retaining Opel and letting it go into insolvency, and came to the same conclusion that alternatives to Magna were either too expensive or damaging.”

One German official said Dr Merkel had not sought to put pressure on the US government to speed up the decision-making process in Detroit. “We realised pretty early that Washington really didn’t want to get involved.”

Jens Weidmann, Dr Merkel’s economic adviser and her main Opel negotiator, sought to contact Michael Froman, President Barack Obama’s G20 sherpa, after the GM board’s failure to reach a decision on August 21st, but was told that the White House was keeping GM at arm’s length.

As suggested by the chancellor in her comments, several German observers said the GM board had been impressed by Berlin’s determination not to consider an alternative bid by RHJ International, a financial investor.

Another possibility for GM’s decision is that the US carmaker may have feared that the next government could withdraw its offer to back an Opel restructuring under Magna’s ownership after the election, while the pressure to save German jobs became less acute.

Opinion polls predict a thin majority for Dr Merkel’s Christian Democratic Union and her preferred partner, the Free Democratic party, which is vigorously opposed to state-financed bailouts, at the September 27th election.

Guido Westerwelle, the FDP chairman, yesterday said Berlin’s early decision to support the Magna bid and underwrite the restructuring Bill had “weakened the German negotiating position, would cost the taxpayer a lot of money, and won’t manage to secure jobs at Opel”.

“We would be in a position to pull our offer and blame the FDP,” one official close to the conservatives said recently.

There had also been signs the German government’s commitment to an Opel rescue under new ownership was fading in recent weeks.

The bailout has proved less popular in the public than politicians had anticipated. Karl-Theodor zu Guttenberg, the economics minister, saw his ratings shoot up when he revealed that he had opposed a state-sponsored solution as it was being negotiated with GM and Magna.

With CDU voters more sceptical than most about state interference in business, one person close to Dr Merkel said a collapse of the Magna offer would have inflicted very little damage, if any, on the chancellor’s re-election prospects.

“But of course it is a good thing that we have a decision now. You don’t really want to go into an election with unfinished business as voters won’t trust you to finish it afterwards.”

Frank-Walter Steinmeier, the foreign minister and Dr Merkel’s challenger at the election, also stands to gain as the main supporter of Magna – along with trade unions and Opel’s workers, whose votes he is courting.