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CONFIDENTIAL CONFIDENTIAL//NOFORN SECRET SECRET//NOFORN UNCLASSIFIED UNCLASSIFIED//FOR OFFICIAL USE ONLY

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

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Reference ID | Date | Classification | Origin
--- | --- | --- | ---
09BERLIN1395 | 2009-11-05 06:06 | 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

`