Opel Watch: A deal, but not a contract

It was a long night again. Not as long as the disastrous Wednesday/Thursday meeting. And it didn’t end in invectives. At 2:15 in the morning, Finance Minister Peer Steinbrück stepped outside Chancellor Angela Merkel’s offices and reported: “I can tell you that a deal has been reached.” If you looked hard enough, you could see holy white smoke rising into Berlin’s night sky.

The German government got most of what they wanted. They got their partner, Magna; they got someone who brings expertise and money (provided by Russia’s Sberbank); and they got their trustee model. Until the last minute, GM’s new overlords in D.C. wanted to avoid that one like another bridge too far. They lost. This paved the way to bridge financing for Opel worth $2.1 billion. The lights will stay on in Rüsselsheim - for now.

Siegfried Wolf, co-chief executive of Magna, cautioned there are still details to be ironed out. A detail such as a contract with GM and its new owners. “In five weeks’ time we should have the formal signing of the contract,” Wolf said. Whoever did even the most simple M&A with a US entity knows that Wolf is an optimist. There’s an army of devils lurking in thickets of details. More “abrasive” negotiations are expected from a government-owned GM. That deal is far from closed.

Steinbrück said US Treasury representatives at the meeting endorsed the agreement. And he graciously abstained from making any new remarks about the qualifications of the Treasury reps. But Berlin is still grumpy about the old hat tactics of sending a good-for nothing delegate to humiliate the other side.

Berlin’s counter: Put a Heckler & Koch UMP to the other side’s hard heads and threaten Konkurs (bankruptcy) by Wednesday. “That created some movement on the American side,” reports Der Spiegel. Just to make sure that no more stupid junior-staffer-tricks are played, Chancellor Merkel had a transatlantic phone discussion with her American colleague Obama on Friday afternoon - principal to principal. And next time troop strength in Afghanistan is on the agenda, Berlin will send a descendant of Karl Valentin.

Friday evening’s discussions, led by Chancellor Angela Merkel, were “conflict laden,” Der Spiegel learned. Economy minister Freiherr von und zu Guttenberg (the Guttenberg bible carries the name of his family) favored a cleaner bankruptcy, recommended by his advisers and most German economists. He thought - still thinks - that the whole rescue operation is fallacious risky business. Von und zu even offered his resignation. Angela talked him out of it, and in the end, political expediency trumped sound reasoning. Why should it be different this time.

Under the new deal, GM and Russia’s Sberbank will — most likely, pending a written contract — hold 35 percent each in a new GM Europe, consisting mainly of Opel and Vauxhall. Magna will get 20 percent, the Opel workers will get 10. Russia’s automaker GAZ will get no shares—they will act as some kind of a strategic partner, at the pleasure or displeasure of Tovarich Putin.

The $2.1 billion won’t be the last note the German government will have to sign. For the next five years, Berlin has committed to loan guarantees worth $6.3 billion. That’s it . . . for the moment.

GM’s Carl-Peter Forster said that “currently” there are no additional monetary demands on the part of GM. How nice.

As for the plants and factories, Magna’s Wolf said that they want to keep all, and as many jobs as possible—in Germany. There was talk about job reductions of about 2,500, achievable through natural attrition or “the biological solution,” as the expression goes in Germany.

Not a word was said about the plants and jobs elsewhere in Europe. Probably part of the details that need to be ironed out. The Guardian is already worried that the Vauxhall van production could shift to Russia’s GAZ. But if Lord Mandelson puts pounds on the table instead of just pounding the table, the fix could be in on that one also. Gotta pay to play.

Compared to the $105 billion that have already been poured down various drains stateside (and the pouring continues, take from the poor, give to the rich), the sums involved in Europe are benign - for now.

Remember: All there is is a memo. They haven’t even begun writing a contract. Under the best of circumstances, getting a deal done with so many parties is hard enough. If nothing is signed, sealed and delivered by 9/27/2009 - election day in Germany - Opel is dead.