Unlike the US, Germany unlikely to bail out automaker

Merkel, in visit to headquarters of GM's Opel unit, says that direct aid is unlikely.

Kai Pfaffenbach/Reuters
Important guest: German Chancellor Angela Merkel shared a laugh with Opel chairman Hans Demant, Hesse’s Prime Minister Roland Koch, and GM Europe CEO Carl-Peter Forster during a visit Tuesday to the automaker’s headquarters in Ruesselsheim.
Johannes Eisele/Reuters
We can survive: An employee of Opel worked on the company's latest model, "Insignia," inside the assembly hangar of the General Motors German unit’s headquarters in Ruesselsheim.
Kai Pfaffenbach/Reuters
Exchange of views: Chancellor Angela Merkel talked to GM Europe CEO Carl-Peter Forster on Tuesday. She said that the German government would help a private investor to secure the Opel unit, which employs about 25,000 people in Germany and has said it needs about 3.3 billion euros in support. But, she noted, direct aid was unlikely.

When the survival of embattled carmaker Opel – and that of his town – are at stake, Roman Catholic priest Balthasar Blumers has no qualms about crossing the lines between religion and politics.

"People are at the center of our system, and every one of them is equal in value," the cleric said Saturday, as he led hundreds of residents on a solidarity march with the company ahead of Chancellor Angela Merkel's visit to the flagship Opel plant.

Just days earlier, Ms. Merkel, backed by her economy minister, had said the company should not expect special treatment, as it wasn't "system relevant."

But on Tuesday, Merkel told 3,000 Opel employees that her government would help secure the company's future by providing potential investors with loan guarantees. Opel, which is owned by troubled General Motors, has said it needs €3.3 billion ($4.5 billion) to avoid bankruptcy under a plan that foresees more autonomy from Detroit and prevents aid money from flowing to Detroit.

Under pressure not to intervene from the conservative wing of her party, Merkel ruled out having the state take a direct stake in Opel. "We must try to do everything to find an investor who, of course with state support ... builds a long-term foundation and who believes in Opel," Merkel said. "For all that the state can do, it never was the best entrepreneur."

But Vice Chancellor Frank-Walter Steinmeier, Merkel's Social Democrat rival, called for direct participation. At stake, he said, was the future of a German icon.

How politicians handle the Opel crisis, balancing national interests with local fallout, could signal how they will tackle other economic challenges.

Opel employs 16,000 people in this town of 60,000 near Frankfurt. But more than 40,000 jobs could be on the line in the region if the company goes under, making the political stakes high six months before national elections.

Workers and Germany's car-dealer association have proposed a minority stake in the company if it becomes a stand-alone operation. Workers have proposed forgoing some wages in return for a stake, while the dealers' association has said it would build up a fund by taking an amount from each Opel car sale.

Susanne Blazejewski, of the European University Viadrina in Frankfurt (Oder), says that unless an investor comes along, the demise of Opel is inevitable. "It has a long tradition, but it's just a company," she says. "If the government saves the company, other companies will stand at the door.

"What the government can do," she says, is "cushion the fall."

From market town to industrial icon

Until the mid-19th century, Ruesselsheim was a small market town. But in the 1870s, a locksmith named Adam Opel transformed it into a industrial icon, opening a factory making such revolutionary tools as the sewing machine, bicycle, and eventually the car. By 1911, his factory was the world's top producer of bikes. In 1937, it manufactured 2 million bikes. A breakthrough came when Mr. Opel's five sons established Europe's first assembly line, making cars affordable for ordinary people.

"Ruesselsheim is Opel," says Wilfried Pfeifer, a fourth-generation Opel worker whose great-grandfather assembled bicycles, as he pushed his twin sons' stroller during the march Saturday.

At its peak in the 1960s, the company employed 53,000 workers. The city invited guest workers – from Italy and Greece first, and then from North Africa. And they still influence the identity of the town; half the population has foreign origins.

"All religions live together," says painter Hans Diebschlag, whose father worked for Opel and whose art adorns the walls of city hall and the Opel headquarters. "The factory is a great unifying factor."

To accommodate its booming population, the town refurbished its pedestrian zone, widened its roads, and built schools, soccer fields, and a theater. Brightly colored skyscrapers sprouted on the outskirts of the old market square – the bright blue, orange, and red dots of the "Dicker Busch" housing project, which is home to 6,000 residents from 80 nationalities, most of whom are Turks and Moroccans.

"Every single person here is, in some way or another, connected with Opel," says Christel Goettert, a publisher who's lived here since the settlement's inception and created a women's center and a neighborhood association to help migrant women. "Now everybody's holding their breath, everybody's shaking."

"It can't be that the state gives out millions of euros for banks, and not one penny to save thousands of jobs here," says Ms. Goettert, referring to billions of euros in aid to banks such as Commerzbank and Hypo Real Estate.

Planners had anticipated Ruesselsheim would have 100,000 inhabitants by now. But after the boom of the late 1970s, Opel went downhill, just as parent General Motors did. From 50,000 employees, fewer than half remained in the early 2000s. The last cut happened four years ago when 4,000 people were laid off. Experts predict that there could be only 15,000 Opel workers left by 2015.

"The important thing is that help comes fast," says Mayor Stefan Gieltowski. "Opel is on its way to being more independent from its parent company, but at the same time, it is looking for capital. In those difficult moments, state guarantees, in the form of loan guarantees or other instruments, are crucial."

Blaming General Motors

GM bought Opel in 1929, when it was about to go bankrupt. Eighty years later, GM is about to go bankrupt with a net loss of $31 billion in 2008, despite billions of dollars of capital injection by the US government. Many here feel the American company is responsible for Opel's trouble.

Manfred Schmitt, a retired Opel engineer, says that putting Opel in the same category as most companies going bankrupt is wrong. "Opel is a unique case," he says. "It was drained into trouble because of its 100-percent entanglement with GM."

On Market Street, Hans Jansen, a local bookkeeper, puts part of the blame for Opel's troubles on GM's production of the "wrong" cars – ones that are too big and consume too much fuel, he says. "Environmental concerns haven't yet sunk in American mentalities," he says.

Mr. Diebschlag, the artist, agrees. "The Germans always prided themselves in development and technology, they always had the feeling that Opel was held back by traditional working methods," he says. "There was an urgency and pressure not felt for a major paradigm change. If Opel could go alone it wouldn't have to comply with American interests anymore."

Ms. Blazejewski, who has studied Opel extensively, says that, "Opel has suffered because there were so many restrictions on models and policies, and cars fulfill a different demand here." But, she says, Opel is too small to survive on its own.

"Opel will always need some partnership with the US, but maybe it will be a different type of partnership," she says. "A partnership with more acceptance of how the European market functions."

As he makes his way along the march's route Saturday, Mr. Pfeifer, the fourth-generation worker, sounded a note of optimism.

"It's a new chance when Opel no longer is a 100-percent daughter of GM," he said. "Opel couldn't do what is good for us. GM doesn't take into consideration the European market."

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