GM : approaching the moment of truth

“There’s no rose without a thorn,” as the proverb goes. About three weeks after Chrysler filed for Chapter 11 bankruptcy protection in New York, it looked as if the Obama administration would pull off its goal of completing the carmaker’s restructuring by June, allowing it to emerge as a smaller, more viable contender in the global auto market. Yet, unfortunately, as the New York Times puts it, both Detroit’s and the White House’s problems didn’t end there :

Still looming is the fate of General Motors, a much larger and more complex company than Chrysler. G.M.’s bankruptcy is becoming increasingly likely as its bondholders refuse to accept the government’s terms for a restructuring out of court.

A decision on Opel’s fate is expected by the end of the month. In the meantime, in Italy, anxieties are growing over the potential downside. If Fiat takes over GM’s European operations, writes the Washington Post,

it could cut up to 18,000 assembly-line jobs in an effort to restore profitability. Worse, Fiat’s basic strategy could fail, given the inherent difficulty of combining three money-losing companies in a star-crossed industry.
"We’re worried that Fiat will internationalize itself and leave Italy in the dust," said Giorgio Airaudo, the regional general secretary of the Italian metalworkers union, which represents thousands of Fiat workers in Turin. "The big questions we ask are: What role will Italy play? What role will our factories play? What will we produce?"

So, as we say in Italy, “If Athens cries, Sparta doesn’t laugh,” that is to say that everyone, Germans included, has his own troubles.

“I guess what the question hangs on is how much of a miracle worker is Mr. Marchionne,” said Marina Whitman, a former economist at General Motors and a professor at the University of Michigan. “In his ambition to become one of the big players in an increasingly consolidated marketplace . . . he's trying to bite off an awfully big chunk.”
The past offers some painful lessons. Daimler AG, the German automaker, paid $37 billion for Chrysler in 1998 but virtually gave it away nine years later to Cerberus Capital Management, a private equity firm. Fiat's partnership with GM between 2000 and 2005 was also a disaster, culminating in GM's decision to pay $2 billion just to get out of the deal.
Martin Leach, a longtime auto executive who served as president of Ford's European operations and managing director of Mazda in Japan, said Marchionn’s plan to pull off a three-way merger is “extremely ambitious.”
[…]
But he said Fiat’s key conviction -- that it needs to grow to survive -- is sound. “Most people might be skeptical of whether Marchionne can pull it off, but if anybody can, he can,” Leach said.
Matteo Colaninno, a member of the Italian Parliament, said Fiat has little choice but to accept Chrysler and GM Europe as partners.
“It’s very risky, but it’s the only path for them to follow,” said Colaninno, a member of the opposition Democratic Party. “It’s much better to ensure that Fiat is in a strategic position to determine its own fate. It’s probably not the perfect situation. But a perfect situation doesn’t exist in the automotive industry today.”

However, today Fiat CEO Sergio Marchionne said that no Opel factory is at risk of closing, should the German carmaker be brought, AGI reports :

This was guaranteed by the Fiat managing director Sergio Marchionne, in the final sprint before May 20, the deadline for the presentation of offers for Opel, who aimed to reassure German politicians about the Ruesselsheim-based group's factories. The newspaper Bild revealed today that yesterday afternoon the top managers met with governor of North Rhein-Westphalia, Juergen Ruettgers (Cdu), at Hotel Hyatt in Cologne, to whom they promised that the Bochum factory would be saved. Bild reports that as left the meeting, Ruettgers ''looked satisfied, because he once again guaranteed that jobs at Bochum would be kept.'' The economic newspaper 'Handelsblatt' reports that Marchionne is planning to meet the governor of Turingia, Dieter Althaus (Cdu), who aims to keep the Eisenach factory running, whilst Marchionne is also aiming to make a quick visit to the Opel plant in Ruesselsheim.
Meanwhile, Angela Merkel has stressed her government's intention to maintain the option of a trustee-administration of Opel, should General Motors go bankrupt. During a programme by the private television broadcaster 'Rtl', during which the chancellor responded to citizens' questions, Merkel added that yesterday's talks surrounding Opel had now reached a ''decisive phase.'' The Economics Minister, Karl-Theodor zu Guttenberg, confirmed that the trustee-administration solution would be maintained. ''If the offers pout out are in-valid, or is Opel has liquidity problems,'' he explained, ''I can't see any other options except a regulated insolvency agreement.''

In the meantime Italian Industry minister Claudio Scajola told the Milan daily Corriere della Sera that “Marchionne has always said and maintained, also in recent days, that closures in Italy are not foreseen,” and that “the strategy would be to aggregate around Turin (both) Chrysler and Opel to create the second-largest group in the world, with the greatest volumes and most evolved products. I would be more concerned if Fiat would have remained still, or if it had been Opel to buy it.”