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Viewing cable 09BERLIN1395, GM DECISION NOT TO SELL OPEL GREETED BY SHOCK AND

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Reference ID Created Released Classification Origin
09BERLIN1395 2009-11-05 06:06 2010-11-28 18:06 CONFIDENTIAL Embassy Berlin
VZCZCXRO9510
RR RUEHAG RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHRL #1395/01 3090620
ZNY CCCCC ZZH
R 050620Z NOV 09
FM AMEMBASSY BERLIN
TO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHFT/AMCONSUL FRANKFURT 8317
RUEHAG/AMCONSUL HAMBURG 0339
RUEHMZ/AMCONSUL MUNICH 2211
RUEHC/SECSTATE WASHDC 5681
RHEHNSC/NSC WASHINGTON DC
INFO RUEHMO/AMEMBASSY MOSCOW 2086
C O N F I D E N T I A L SECTION 01 OF 02 BERLIN 001395 
 
SIPDIS 
 
E.O. 12958: DECL: 11/04/2019 
TAGS: ETRD ECON ELAB PREL RU GM
SUBJECT: GM DECISION NOT TO SELL OPEL GREETED BY SHOCK AND 
ANGER IN GERMANY 
 
REF: A. BERLIN 01131 
     B. BERLIN 01093 
     C. BERLIN 00390 
     D. BERLIN 00272 
     E. BERLIN 00214 
 
BERLIN 00001395  001.2 OF 002 
 
 
Classified By: ECONMIN Robert A. Pollard for reasons 1.4 (b,d). 
 
1. (C) Summary: Just hours after Chancellor Merkel's historic 
November 3 address to a joint session of Congress, General 
Motors (GM) canceled its sale of Opel to Canadian auto parts 
manufacturer Magna.  The decision, which followed repeated 
assurances from GM that it was a done deal, came as a 
complete shock in Germany and dominated media coverage 
throughout the day.  Merkel herself was reportedly highly 
upset over GM's flip flop.  Ulrich Wilhelm, the Chancellor's 
spokesman on Opel said the German government "regretted" the 
decision, and reminded GM that it must now repay Berlin's 1.5 
billion bridge loan to Opel by the end of the month, while 
FDP Economics Minister Rainer Bruederle described GM's action 
as "totally unacceptable."  The cabinet was expected to 
discuss the GM move on November 4. Opel's labor unions, which 
had strongly backed the Magna sale because of its promise to 
save jobs and keep plants open, announced that workers would 
withdraw all concessions made under the terms of the Magna 
deal and sta 
rt a general strike at Opel plants on November 5.  While 
anger is widespread, there are already some voices outside 
the government advocating acceptance of GM's announcement as 
the only viable alternative to a total collapse of Opel.  End 
Summary. 
 
 
Germany's Political Establishment Reacts with Anger 
--------------------------------------------- ------ 
 
2. (C) Opinion across the political spectrum has been 
uniformly negative.  FDP Economics Minister Rainer Bruederle 
blasted GM's behavior as "totally unacceptable."  Juergen 
Ruettgers, Minister President of Nordrhein Westfallen (CDU), 
asserted that GM's decision showed "the ugly face of turbo 
capitalism." 
The leadership of the FDP, whose opposition to government 
intervention in the Opel deal is well known, joined in the 
condemnation of GM.  A high-level source indicated that 
Chancellor Merkel is furious over the GM move and refuses to 
talk to GM's leadership.  It is likely to be only a matter of 
time before critics will call Merkel herself into account for 
her strong support of the 
now collapsed Magna deal.  The Cabinet has been called into 
session and is likely to confirm the withdrawal of all 
financial support and a demand that GM repay the government's 
1.5 billion Euro bridge loan by the end of the month. 
 
3. (C) Jochen Homann, the Economic Ministry State Secretary 
heading the German interagency working group on Opel, told 
EMIN on November 4 that there was no possibility of further 
German financial assistance to Opel in the foreseeable 
future.  The failure of the Magna deal and GM's reputation as 
"an unreliable partner" would likewise complicate 
negotiations with other governments seeking to preserve Opel 
jobs and factories.  Although no one directly blamed the USG, 
the Germans are still having trouble understanding how GM 
could act independently of Washington.  Dr. Schubert, one of 
Homann's lieutenants, complained to the Embassy that "if the 
U.S. Government had GM under better control, this would not 
have happened."  It is now up to GM, he said, to submit a new 
restructuring and financing plan, as their previous one is 
out of date.  Schubert was adamant that this time "there will 
be no special treatment for Opel" and GM's plan would have to 
go through normal channels. 
 
 
Matched by Threats from Organized Labor 
--------------------------------------- 
 
4. (SBU) Klaus Franz, the head of Opel's Works Council, 
announced on November 4 that Opel's 25,000 employees in 
Germany will begin an indefinite strike on November 5 to 
protest the GM decision.  Franz called on all 55,000 Opel 
workers across Europe to join in.  Accusing GM of 
"blackmailing" governments and workers in Europe to sign on 
to its "unacceptable" restructuring Plan, he also revoked 
prior labor commitments to contribute 388 million dollars in 
foregone benefits to the Magna sale. 
 
BERLIN 00001395  002.2 OF 002 
 
 
 
5. (C) Oliver Burkhardt, head of the Metal Workers in NRW, 
likewise condemned the decision as "bold and unfriendly," not 
only to Opel employees, but to the German government. 
However, Burkhardt conceded that he is waiting to see a long 
term GM plan for Opel that relies on more than cost-cutting 
and down-sizing.  In contrast to Klaus Franz, Burkhardt 
contended that non-German labor unions were "elated" over the 
failure of the Magna deal (which was tilted against workers 
in other countries) and doubted they would heed Franz's 
strike call.  He also predicted that the strikes in Germany 
will be short-term and largely symbolic rather than actual 
closures, adding "we are not going to close the door on a 
solution with GM."  Similarly, Fred Irwin - Citigroup's 
country manager in Germany and the Chair of the Opel Trust 
that oversaw the Magna negotiations - predicted that unions 
will eventually reconcile with GM once they realize there is 
no other choice. 
 
 
While Despair Permeates Opel Executives 
--------------------------------------- 
 
6.  (C) Opel managers such as Berlin Representative Uwe 
Berlinghoff, who almost uniformly favored the Magna contract, 
were also "taken completely by surprise" by the GM 
announcement.  Berlinghoff now expects GM to resurrect its 
pre-Magna restructuring plans, including closure of plants at 
Bochum (and Antwerp, Belgium) and the sale or closure of the 
Eisenach plant.  Berlinghoff also expected the German 
government to cancel the expected 4.5 billion dollar loan 
guarantee package, as "GM has demonstrated its lack of 
credibility with German politicians." 
 
 
Research and Development and IPR Could be Key 
--------------------------------------------- 
 
7. (C) German auto industry insiders have privately 
identified compelling reasons why GM cancelled the Magna 
deal.  Among these are the importance of the GM/Opel Research 
and Development facility in Ruesselsheim and its patents to 
GM's development of small efficient cars in Europe, the U.S. 
and elsewhere.   GM was also reportedly skeptical that it 
could adequately protect crucial IPR from Russian 
exploitation because of the Sberbank/Gaz partnership with 
Magna.  Moreover, Magna had oversold its ability to penetrate 
the Russian market.  GM's announcement stressed its plans to 
build on its already significant business in Russia while 
retaining Opel and to work closely with Gaz without a Magna 
partnership. 
 
 
But Auto Leader Welcomes the Move 
--------------------------------- 
 
8.  (C) Dr. Norbert Reithofer, the CEO of BMW, told the 
Ambassador on November 4 that GM's move would be welcomed by 
the German auto industry.  Reithofer was adamant that there 
was no way BMW and the other German auto manufacturers would 
have purchased auto parts from Magna once it became a direct 
competitor as an auto manufacturer.  In Reithofer's view, 
Magna made the Opel purchase proposal in a moment of panic at 
the height of the economic crisis, but now that a recovery is 
in the offing, probably is not unhappy to see it dissolve. 
 
 
Comment 
------- 
 
9. (C) Despite the considerable German ire aimed at GM, much 
of it is aimed at GM's handling of Opel (in particular the 
timing of the November 3 announcement), rather than its 
business rationale for retaining its German subsidiary. 
Thoughtful German opinion leaders, including former Economics 
Minister zu Guttenberg conservatives in the German business 
community, were equally critical of Berlin's strong arm 
lobbying on behalf of Magna.  An Opel Trust Board Member and 
FDP politician Dirk Pfeil has already issued a statement 
urging Berlin to provide 3 billion Euro in state aid to keep 
GM afloat.  Like it or not, the German governments will need 
to seek an accommodation with GM to keep Opel alive. 
 
MURPHY