Dr. Zetsche is trying to have it both ways on government aid to auto companies.
The German government should not offer Opel, the heart of General Motors’ European operations, any special aid, according to Daimler AG Chief Executive Officer Dieter Zetsche. He made this assertion at the company’s shareholders’ meeting in Berlin. Not only is it surprising that Zetsche would wade into this political quagmire, but the patent hypocrisy of his position is clear, where he endorses government aid to help Chrysler avoid bankruptcy, thereby cutting Daimler’s exposure of more than $1 billion in liabilities at the same time as he accepts German government aid for Mercedes-Benz.
Zetsche also admitted that governments are facing the full brunt of a global economic crisis.
“Just think about how quickly the most pro-market governments have moved to partially nationalize their country’s banking system in order to prevent a total meltdown of the global financial system,” Zetsche said.
“I emphatically approve of the decisive action taken by political leaders. After all, extraordinary circumstances call for extraordinary measures and governments simply have to step in when a crisis threatens the very foundation of our free-market system,” he said.
In fact, Daimler is using short-week benefits provided by the German government to reduce bloated inventories at a critical time. In addition, it is asking its 20 unions for $2.6 billion in concessions. Other German automakers, Volkswagen AG and BMW, are certain to follow suit if Daimler is successful, which is considered likely. Indeed, unions at Opel AG have already begun offering concessions in an effort to avert the historic demise of GM Europe.
The German federal government is also expanding efforts to encourage motorists to scrap older vehicles in an effort to stimulate sales in Germany.
Zetsche said he was opposed to the idea of having the German central government in Berlin trying to save Opel. “It’s not the government’s job to address all the effects of the crisis and thereby directly intervene in the competitive environment. Trying to answer the question whom the government should help and whom it shouldn’t automatically leads to arbitrariness and injustice,” Zetsche claimed.
“Even in this ‘super election year’ for Germany, we therefore must be strong enough to remain true to the principles of the socially responsible market economy,” he said.
Meanwhile, the Financial Times reports that GM has retained Commerzbank to help find a potential buyer for Opel. Speculation is that German regions with Opel plants could acquire an interest in Opel with help from investors from the Middle East. Russian buyers also are said to have expressed an interest in Opel, and there also reports private equity groups that could be interested in the company.
However, a Daimler official noted one of the major barriers to any kind of deal for Opel are the terms of the loan GM obtained to stay solvent back in December. Terms of the loan show the U.S. Treasury required GM to put up Opel factories and technology as collateral, he said.
The loan terms also make it more difficult for the German government to take a direct stake in Opel as a cover for a loan that would keep the company intact.