Inside the Collapse of GM's Opel Deal

From meddling politicians to a skeptical U.S. board to tough tactics in Brussels, GM's sale of the German Opel unit fell apart when its weak logic unraveled

Many refer to the man in charge at the corporate headquarters of General Motors (GM), housed in the five glass towers of the Renaissance Center in downtown Detroit, as "Fix-it Fritz."

Frederick A. Henderson, 50, the chairman and CEO of GM, has always been called Fritz, even as a child. He is a polite man who, in his 25-year career at GM, has acquired the reputation of being a levelheaded numbers and cleanup man, a problem-solver—hence the nickname.

Last Tuesday, the German chancellor made the unpleasant discovery that Henderson lives up to his moniker. In the space of 20 lines on a piece of paper, Henderson destroyed Angela Merkel's dream of being celebrated as the intrepid savior of German automaker Opel.

In the short letter to Merkel's newly appointed economics minister, Rainer Brüderle, Henderson announced that the board of directors planned to "retain Opel Europe as part of the new GM." In explaining the decision, he cited the parent company's "improved financial position" and its newfound confidence in the "sustainable profitability" of the subsidiary. At the end of the letter, Henderson also expressed his appreciation for the "involvement and support of the German government and other European governments."

A German chancellor has rarely been given such short shrift by the chief executive of an industrial corporation. Merkel and half the German cabinet had spent more than a year in negotiations with the US company so that GM's German subsidiary, Opel, could be sold to a consortium of investors headed by the Canadian-Austrian automotive supplier Magna (MGA) and the Russian Sberbank (SBER.RTS). The matter seemed to have been settled—but then GM management performed an about-face last Tuesday. In doing so, it inflicted serious damage on the chancellor, who met with US President Barack Obama and gave a noteworthy speech to the US Congress on the same day.

The surprise coup from Detroit triggered an unprecedented wave of outrage in Germany. Tens of thousands of Opel employees staged protests outside plants in the cities of Rüsselsheim, Bochum and Eisenach, shouting "GM, get lost!" Politicians at the federal and state levels outdid each other with tirades against what Social Democratic Party opposition leader Frank-Walter Steinmeier dubbed the American "impertinence" and North Rhine-Westphalia Governor Jürgen Rüttgers, a member of Merkel's conservative Christian Democratic Union (CDU), described as the "ugly face of turbo-capitalism."

Even the pro-business Free Democratic Party (FDP), the junior partner in Merkel's new coalition government, which just a few weeks ago had been sharply critical of the former administration's rescue plans for Opel, joined in the cross-party diatribes. Economics Minister Rainer Brüderle, who belongs to the FDP, said the GM decision was "completely unacceptable."

Political Humiliation

The real motive behind all this indignation was to cover up a political humiliation of the first degree. Rarely has an administration lost its bearings as much as the Merkel-led "grand coalition" of the Christian Democrats and Social Democrats did in its attempt to forge a new European auto company under the name "New Opel."

German auto executives were not the only ones who felt that the chancellor's plan to mold a Canadian-Austrian automotive supplier, Russia's leading savings bank, the European GM subsidiaries and billions in taxpayer money into a competitive, global company was a ludicrous idea. The plan was also widely criticized abroad. The United States feared that Western know-how would be lost to Moscow, while many in Europe were convinced that Germany was trying to unilaterally protect jobs in its domestic industries.

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