GM talks with Europe break down, Chrysler future on hold

The US auto industry faced an uncertain future on Thursday after talks with Germany on the fate of General Motors’ (GM) Opel unit collapsed in acrimony and as Chrysler waited for a court to decide its future.

Both GM, the largest US auto manufacturer, and Chrysler, the third biggest, are being kept alive by massive assistance from Washington but their prospects now depend on further help from foreign partners and governments.

Battered by dwindling consumer demand and bad product choices, the once-mighty icons of the US auto sector are in turmoil. GM appears to be heading toward bankruptcy, a step already taken by Chrysler.

The fate of GM Motors hinges in part on shedding its European operations, notably German unit Opel, which employs 25 000 people in Germany.

But all-night talks among German and US government officials, as well as GM representatives, to find a buyer for Opel fell apart early Thursday, with Germany accusing GM and US negotiators of scandalous bargaining tactics.

While the final choice of a buyer rests with GM and the US government, German involvement is critical as Berlin is prepared to provide billions of euros in loan guarantees to any potential investor.

At the last minute, however, Germany said GM and the US government had asked for an extra €300-million euros in temporary loans from Berlin to keep Opel afloat, a tactic slammed by Finance Minister Peer Steinbrueck as scandalous.

“We were unpleasantly surprised when this new demand came out of the blue at 8:00pm local time,” Steinbrueck told reporters.

“We found that pretty scandalous.”

Fresh talks are scheduled for Friday, with Berlin hoping to name its preferred bidder ahead of GM’s likely bankruptcy on June 1, a deadline set by the US government for the company to come up with a rescue plan.

German Foreign Minister Franz-Walter Steinmeier on Thursday told reporters he was “very confident” that talks on Friday would result in a deal.

Declaring Opel insolvent also remains an option, German officials said.

For the moment, two bidders, Italian car giant Fiat and Canadian auto parts maker Magna International, remain in the race after a third, Brussels-based investment firm RHJ International, pulled out during the talks.

Magna’s offer is still seen as the front runner, with unions and centre-left Social Democrat members of the governing coalition backing it.

It has teamed up with Russia’s top bank, state-controlled Sberbank, for a bid that would see precious metals tycoon Oleg Deripaska’s truck company GAZ making Opel vehicles in Russia.

For its part, Fiat wants to combine GM’s European and Latin American operations with Chrysler, in which it has secured a 20% stake, to create the world’s second largest automaker after Toyota of Japan.

Chrysler’s future meanwhile rests with a bankruptcy court in New York.

Judge Arthur Gonzalez was set on Thursday to hold a second and possibly decisive day of hearings on Chrysler’s bid to seek salvation as a partner of Fiat.

Fiat chief Sergio Marchionne flew to the United States on Thursday after spending all night in Berlin pushing his bid to take over Opel, a company source said.

“Marchionne has left for the United States directly from Berlin to work on Chrysler,” the Fiat source said, without elaborating on his planned itinerary.

Judge Gonzalez was widely expected to overrule hundreds of objections to the Chrysler rescue plan and approve the bankruptcy but on Wednesday he said more witnesses were to be heard on Thursday and possibly even Friday.

If Gonzalez approves the bankruptcy, a new-look Chrysler could emerge within days, according to President Barack Obama’s administration, which is spearheading the plan and providing emergency funding.

Under a worst-case scenario Fiat could abandon the tie-up, sending Chrysler into liquidation.

Opponents to the deal with Fiat include creditors and many of the car dealerships who face being shut down but supporters argue that it is the only option on offer.

Fiat executive Alfredo Altavilla, an architect of the proposed partnership, warned that “if this agreement is not closed by June 15 we will need to reconsider our ability to close the transaction.”

At the same time, Chrysler could be brought back to profitability in the same way Fiat was rescued from its own financial problems, starting in 2004, he added. — AFP

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Covid-19 vaccines offer hope as world leaders plan for future

Hopes over Covid-19 vaccines have given a boost to virus-weary citizens across the globe, but the disease remains rampant and world leaders are urging people to be patient

Bye-bye, Don. But is this the end of Trumpism?

If it hadn’t been for Covid-19, Donald Trump might have won the presidential election. Almost 48% of voting Americans believe in his brand of democracy, equality and justice.

The Trump era is over. But the fight for democracy is just getting started

A respected and robust United States — with all of our flaws, mistakes and missteps — can be good for the defence of democracy, not least in Africa

The US election problem is over, but the coronavirus lingers

Ending the lockdown is a policy both Trump and Biden voters could agree on

A Biden win isn’t necessarily a win for the rest of us

Much like there was an overwhelming euphoria that gripped many Zimbabweans when they finally said asante sana to Robert Mugabe, Trump’s removal won’t change the colour of America’s fabric too drastically

America’s democracy is broken. What does that mean for us?

Many African countries modelled their political system on the United States. But given the flaws in the model, it may be time to reconsider

Subscribers only

Covid-19 surges in the Eastern Cape

With people queuing for services, no water, lax enforcement of mask rules and plenty of partying, the virus is flourishing once again, and a quarter of the growth is in the Eastern Cape

Ace prepares ANC branches for battle

ANC secretary general Ace Magashule is ignoring party policy on corruption-charged officials and taking his battle to branch level, where his ‘slate capture’ strategy is expected to leave Ramaphosa on the ropes

More top stories

Journey through anxious Joburg

A new book has collected writing about the condition of living, yes, with a high crime rate, but also other, more pervasive existential urban stresses particular to the Global South

Football legend Maradona dies

The Argentinian icon died at his home on Wednesday, two weeks after having surgery on a blood clot in his brain

Why no vaccine at all is better than a botched...

As Covid vaccines near the manufacturing stage, a look at two polio vaccines provides valuable historical insights

Under cover of Covid, Uganda targets LGBTQ+ shelter

Pandemic rules were used to justify a violent raid on a homeless shelter in Uganda, but a group of victims is pursuing a criminal case against the perpetrators

press releases

Loading latest Press Releases…