Argument

An expert's point of view on a current event.

Opel Question

Holding on to Opel would be the smartest move GM has made in months, but did they ever actually plan to sell it?

KAVEH ROSTAMKHANI/AFP/Getty Images
KAVEH ROSTAMKHANI/AFP/Getty Images
KAVEH ROSTAMKHANI/AFP/Getty Images

It isn't often that a lowly freelance journalist gets the chance to alter the course of industrial history. Perhaps I can't take all [or even some --ed.] of the credit, but this writer is certainly gratified to learn that General Motors' freshly installed board of directors appears to be taking the advice I proffered on ForeignPolicy.com last May by reconsidering the planned sale of its Opel division.

The sale of the German carmaker to Canadian auto-parts giant Magna International and Russian bank Sberbank was considered a done deal only a short time ago, but stalled after endless vetting by the parent company. General Motors (GM) has a second serious bidder in RHJ International, a Belgian private equity firm, but this deal is also looking doubtful. Well, hear, hear. The German government will be seriously steamed. But (fingers crossed) one of the worst strategic disasters in GM's 101-year history will have been averted.

It isn’t often that a lowly freelance journalist gets the chance to alter the course of industrial history. Perhaps I can’t take all [or even some –ed.] of the credit, but this writer is certainly gratified to learn that General Motors’ freshly installed board of directors appears to be taking the advice I proffered on ForeignPolicy.com last May by reconsidering the planned sale of its Opel division.

The sale of the German carmaker to Canadian auto-parts giant Magna International and Russian bank Sberbank was considered a done deal only a short time ago, but stalled after endless vetting by the parent company. General Motors (GM) has a second serious bidder in RHJ International, a Belgian private equity firm, but this deal is also looking doubtful. Well, hear, hear. The German government will be seriously steamed. But (fingers crossed) one of the worst strategic disasters in GM’s 101-year history will have been averted.

There are a host of reasons why it makes no sense for GM to unload Opel, even as part of its strategy for a leaner, meaner future, and the reasons cited by GM insiders today are as good now as they were a few months ago when I wrote my piece. Opel is one of GM’s premier engineering outposts, especially for high-mileage, electric, and fuel-cell vehicles, the stuff GM will need to compete in coming years. The best affordable sedans GM sells in the United States — the Malibu and Saturn Aura — are based on Opel designs, as is GM’s most economical SUV, the Vue. Opel’s small-car expertise, along with many of its models, can be more or less directly transferred to U.S. showrooms. Ford — the only American carmaker to have avoided bankruptcy proceedings — has followed a similar strategy with its compact European cars and trucks. Opel has been more profitable than not in recent years, which is more than you can say for the other brands GM is offloading, and even some of the ones it is keeping. Opel also provides a beachhead for the company in the crucial European automobile market — one of the world’s largest, along with the United States’ and China’s — as well as a vital presence in the burgeoning Russian car bazaar.

As we have already witnessed, government bailouts can make strange bedfellows even stranger. The German government and German autoworkers union have said in no uncertain terms that they can’t wait to rid Opel of GM ownership. There is evidently the sense that GM will be more ruthless than its (ruthless) suitors in terms of eliminating jobs, a key issue on the eve of German elections. So though you shouldn’t expect Chancellor Angela Merkel’s government to give GM a pfennig for Opel’s survival, Germany has pledged in principal to lend Magna, with comparatively little experience in auto manufacturing, or RHJ, with none, as much as $6.4 billion to aid their proposed acquisitions. Meanwhile, the new GM Lite will — barring a change of government or policy — have to borrow $6 billion privately to fund Opel’s recovery. Now that the parent’s bankruptcy is out of the way, this is no longer an unthinkable proposition. Major financial institutions have surely lent greater sums for causes far more gone.

Weighing the evidence, some may conclude that GM was, in fact, only pretending to sell Opel, knowing that the concept of U.S. taxpayer funds going to prop up a German company wouldn’t have played well when America’s largest automaker went to Congress seeking a bailout.

It wouldn’t be the only car giant playing close to the vest as it scrambles for federal money. Toyota recently announced, after months of dithering, that it would shut the New United Motor Manufacturing plant in Fremont, Calif. — its former joint venture with GM and its only plant staffed by the United Auto Workers. The announcement was quiet, but the timing was intriguing, to say the least: Only a couple of days had passed since the government’s cash-for-clunkers program ended, a noteworthy detail as the taxpayer-supported program had made the Corolla built at the Fremont plant America’s best-selling car. With the program expired, Toyota disclosed that, like GM, it was bailing out of the plant, for good. All future Corollas destined for the American market will be imported from Canada or Japan. As Toyota’s ads used to trill: Oh, what a feeling.

Jamie Lincoln Kitman, a New York lawyer and winner of the 2009 National Magazine Award for commentary, is New York bureau chief of Automobile Magazine and U.S. editor of Britain's Top Gear.

More from Foreign Policy

A Panzerhaubitze 2000 tank howitzer fires during a mission in Ukraine’s Donetsk region.
A Panzerhaubitze 2000 tank howitzer fires during a mission in Ukraine’s Donetsk region.

Lessons for the Next War

Twelve experts weigh in on how to prevent, deter, and—if necessary—fight the next conflict.

An illustration showing a torn Russian flag and Russian President Vladimir Putin.
An illustration showing a torn Russian flag and Russian President Vladimir Putin.

It’s High Time to Prepare for Russia’s Collapse

Not planning for the possibility of disintegration betrays a dangerous lack of imagination.

An unexploded tail section of a cluster bomb is seen in Ukraine.
An unexploded tail section of a cluster bomb is seen in Ukraine.

Turkey Is Sending Cold War-Era Cluster Bombs to Ukraine

The artillery-fired cluster munitions could be lethal to Russian troops—and Ukrainian civilians.

A joint session of Congress meets to count the Electoral College vote from the 2008 presidential election the House Chamber in the U.S. Capitol  January 8, 2009 in Washington.
A joint session of Congress meets to count the Electoral College vote from the 2008 presidential election the House Chamber in the U.S. Capitol January 8, 2009 in Washington.

Congrats, You’re a Member of Congress. Now Listen Up.

Some brief foreign-policy advice for the newest members of the U.S. legislature.