If Germany wants to rescue the auto manufacturer Opel, it would be helpful if it looked across the Atlantic for an example.
As General Motors faced insolvency at the end of 2008, CEO Rick Wagoner wrote an op-ed piece for the Wall Street Journal. In it, he claimed to have fired 30 percent of the GM work force and said an additional 10 percent would inevitably suffer the same fate. Wagoner concluded that was reason enough to grant the company government aid.
The article caused considerable protest. In spite of that, however, the U.S. government gave its blessing to the restructuring plan and gave GM billions of dollars in financial assistance. GM reorganized, made the largest initial public offering in U.S. history, retook the lead spot as the world’s largest auto manufacturer and has been financially back in the black ever since. Even more important: The company is hiring again, and will soon have more employees than it did prior to going broke.
Germany chose a different path for Opel: When GM was pondering factory closures in 2009, Berlin promised Opel a dowry in the form of government-guaranteed loans with the proviso that Opel didn’t close any of its facilities. Where that strategy ultimately led can be seen in Opel’s annually increasing financial loses.
There are only two options left for Opel: Drag the company’s reorganization out even longer until, one day, the doors close for good; or embark on a painful but sustainable reorganization and look happily forward with its U.S. parent’s concern to a rosy future.
It remains to be seen if American taxpayers will see a decent return on the billions of dollars it invested to get GM back on its feet. It’s doubtful. A few hundred jobs at depressed wages don’t count. American corporate taxes are outrageously low; the biggest corporations don’t pay any taxes at all.
The Opel deal may have been badly negotiated, but comparing it unfavourably to the GM bailout is a very bad idea.