The second mouse gets the cheese

The news these past few days has been full of the fury coming from Germany over GM’s decision to shut the door on the sale of Opel to Magna.  We’ve been following this story closely here at Zeitgeist and we’re finding this German fury somewhat disingenuous.  Let’s consider some of the pertinent facts.
First, GM didn’t want to sell Opel in the first place; it was forced upon them as a consequence of the US taxpayers not wanting to bail out the carmaker’s foreign operations.
Second, Opel is critical to GM’s global strategy as you cannot be a global player if you are not represented in Europe.
Third, Russia is a big target market for GM and represents a huge opportunity to extricate itself from the current financial struggles.  Penetrating that Russian market from within Europe is key.
Fourth, the demand for less thirsty, European styled cars in the US is growing rapidly and GM would be very reluctant to lose its European technology.
Fifth, the German election, at least for us cynics, appears to have been playing a part in the German government’s generous bail out proposal for the Magna deal (4.5bn Euros in loans) even if this would probably have fallen foul ‘eventually’ of the European Commission’s view on the competition rules.  A somewhat hypocritical stance given Germany’s leading influence within the EU?  No doubt.
Of course we can feel the German discomfort – especially since Magna had guaranteed no German factory closures whereas the new GM plan has not so far been revealed.  Although having said that, Magna guaranteeing such a thing does appear a little strange in terms of a business strategy – particularly if the loans referred to above do indeed get penalized by the competition rules.  Painting themselves into a corner is a phrase that springs to mind.
It will be interesting to see what the German government’s view is on supporting GM going forward now that the election is over.  Certainly GM will still need state support and inducements from European countries where it has operations. GM has agreed to repay the 1.5bn Euros loan it has already received from the German government to shore it up during this past period of financial trauma.  Now we need to see which countries will be prepared to support the carmaker going forward as inevitably it will concentrate its jobs in countries where support is forthcoming.
There was already concern that with the Magna deal the German aid package was linked to job guarantees therefore putting other European countries production facilities at risk.  Now, of course, we see the German Opel workers laying down tools in protest at GM’s U-turn.  An understandable but shortsighted decision, perhaps?
It will be interesting to watch GM’s bargaining power unfold as it looks for local aid going forward.  Certainly Germany will be in an uncomfortable bargaining position should GM be surrounded by supportive politicians from other member states who are prepared to support a sustainable GM European strategy.
So often the early bird is in a good position to catch the worm but this story is an example of the second mouse that always gets the cheese….