Final Inspection

A Different Plan to Save Opel

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GM should immediately spinoff Opel as its own stand-alone company.Then Opel needs to kick all the Americans off the board with no more ties to Detroit. It must become a fully German auto maker, free to build the products it wants, selling them where it sees fit.

If General Motors had deliberately planned to confuse its employees, mystify the investment community and infuriate the German government, it could not have succeeded more grandly. When it comes to botching the turnaround at Opel, it’s “Mission Accomplished.”

The unraveling of a once-proud German auto maker that used to deliver $1 billion a year in net profits to its parent company is disheartening. Today, Opel is losing $1 billion a year with no relief in sight, no matter how much GM professes to have a plan in place.

GM has a long history of treating Opel as an unimportant part of the company. Since 1990, it churned through nine different CEOs, whose average tenure lasted a little more than two years. Some only lasted a matter of months. How can you possibly run a business that way?

Now GM is looking for a new CEO to run Opel. GM Vice Chairman Steve Girsky currently is serving as interim head of GM European operations.

A few years back, it looked like GM was going to sell Opel to Canadian supplier Magna with financing from the Russian bank, Sberbank. It was on the brink of getting $5.5 billion in government assistance from Germany, Britain, Spain and Belgium to restructure Opel. And the works council (union) was ready to grant significant concessions to slash labor costs. The outcome could have been very positive.

But in a last-minute decision, with no forewarning and not much explanation afterward, GM’s board reneged on the deal. German Chancellor Angela Merkel, on a visit to the U.S. at the time, only learned of GM’s decision after she met with President Obama in the White House.

She was seething. Who could blame her for suspecting the president, whose automotive task force appointed four members to the GM board, knew but neglected to inform her of what was coming? GM singlehandedly soured U.S.-German relations.

And it wasn’t just Merkel. Other German officials lashed out at GM, which now has earned persona non grata status in Germany.

The timing couldn’t be worse. The European auto industry desperately needs to restructure itself to bring capacity in line with demand.

But European governments are dead set against layoffs or plant closings. Fiat CEO Sergio Marchionne, as well as this year’s president of the ACEA, the European auto makers organization, is pleading for a pan-European solution.

However, Volkswagen, Daimler and BMW are not interested in a European solution. Their plants are operating near capacity, and they don’t see the need to lend their competitors a helping hand. Their brands are so strong, and their exports so healthy, that they’re likely to shrug off the downturn hitting the European market. Ergo, the German government isn’t interested, either.

GM says it’s ready to pour billions into restructuring Opel, even while admitting it will lose billions for years to come. What kind of plan is that? What’s needed is drastic action that solves the problem now.

GM should immediately spinoff Opel as its own stand-alone company. No more wholly owned subsidiary. Then Opel needs to kick all the Americans off the board with no more ties to Detroit. It must become a fully German auto maker, free to build the products it wants, selling them where it sees fit.

GM could continue contracting Opel to develop products for another design cycle or two, but in time, GM Korea and GM China could pick up the slack. Opel would be free to use and license its in-house technology as it chooses, which would not be a great loss to GM. Cars and powertrains are changing so rapidly as auto makers race to meet fuel-economy and carbon-dioxide regulations that any “secrets” largely will be obsolete before the decade is out.

With GM out of the picture, the German government instantly would be more interested in helping Opel with the financing it needs to restructure. The works council would prove cooperative. The German public would rally around the underdog. Marchionne would be one of the first to phone in his congratulations, and to begin talks to get the European Union to fund an Opel-Fiat-PSA combination/restructuring.

With the spinoff, GM could rescind the $3 billion it planned to invest in Opel. And it could take $1 billion in losses off the books. Think of it, a $4 billion turnabout, and they could do it all by Christmas.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline” for WTVS-Channel 56, Detroit, and “Autoline Daily,” the online video newscast.

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