Freitag, Mai 29, 2009

More Details...

In today's Handelsblatt there are some more details on how the Obama Administration has managed to really annoy the Germans.

Opel, with around 50 000 jobs in Germany, has to be purchased from GM by whomever before GM declares Chapter 11, because once GM does that, Opel can't be sold until GM comes out of Chapter 11 or until the bankruptcy court allows the sale.

Hence the German government wanted to work out a deal with the folks interested in acquiring Opel, basically Fiat, Magna and RHJ.

Let's capture a couple of the facts - facts, not speculation - about what went down.

First of all, on Wednesday PM, the German Chancellor (Angela Merkel), the Vice Chancellor, the German equivalent of Treasury (Finanzminister), the Economics Minister, along with their staffs, met in the offices of the Chancellor in Berlin,, along with folks from Fiat, Magna and RHJ, a financial investor. They were then joined by the representatives of GM and the American government.

Who did the Americans send? GM sent Carl-Peter Forster, GM's European Manager (indeed, GM isn't just looking to sell Opel, but its entire European division), along with staff members. The Obama Administration sent ... an unnamed investment banker from Rothschild.

I am not kidding: the US Treasury Department couldn't be bothered to actually send someone capable of signing anything, despite the fact that they are directly involved in the decision whether or not to sell Opel, since they are the only ones who can provide any sort of state guarantees that investors are looking for in these troubled times. To underscore the importance of having the right folks together, the German equivalent of the US Treasury, the Finanzministerium, has been pressuring Treasury to send a representative who can make the decision to close the deal. Peer Steinbrück has requested this directly from Tim Geithner: instead, an unnamed investment banker from Rothschild has been sent as an observer.

In other words, the lack of proper staff at Treasury - which remains a serious problem - has now led to a diplomatic faux pas. If you want something from someone, you don't send an underling to simply be an observer: you send someone who can make a decision so that you can get what you want. If you don't do that, you are sending the clear and unmistakeable message that you simply don't care.

To make things worse, since the unnamed investment banker from Rothschild does not have a portfolio from Treasury - in other words, he cannot make any decisions for the US government - he is not permitted to be part of the discussions between the German government, GM, Opel and the investors.

As Forster tells the German government that the price just went up by $500mn, the Germans are pissed off (rightly so, I might add): when the Germans finally get John Blum on the telephone to talk about at least some sort of government guarantee that the money will be paid back, he can't help them.

The Germans, are, at this point, speechless. They're supposed to send an additional $500mn within 2 (yes, that's two) days to GM in Detroit, immediately before bankruptcy, with no guarantees that they will ever see the money again?

Well, apparently the Obama Administration thinks the Germans are idiots.

The Germans then talk to both Fiat and Magna. Fiat sticks with its offer: Magna is willing to pay the additional $500mn, but only if the German state guarantees that the money will be paid back if GM enters bankruptcy. RHJ is now out of the running, since they are only willing to guarantee that two factories will continue to run if they take over Opel, which gets them tossed out.

Germans love to have things planned: the original idea was that the investors and the German government work out their deals, then the German government works out a deal with GM and the US government; then the investors and GM, with the blessings of the German government, works out their deals, papers are signed, and then the publicity folks do their thing.

Instead, chaos.

The Obama Administration, according to one person involved, sent, at best, backbenchers to the game. Those sent to represent the US were folks who appeared to have heard first about Opel while flying over.

The Germans are seriously pissed. Basically, the German government spent an entire night trying to work out a deal, trying to save 50 000 jobs, and the US government couldn't be bothered to even send a proper representative, even though they are directly involved in the deal. The Germans were prepared and organized; the potential buyers were there and were organized, ready to cut a deal; the representatives of GM were there, organized and ready to cut a deal; the Obama Administration, via the Treasury, couldn't be bothered.

Today the German government is trying to work out yet another deal. Chances that they will are, basically, null: as of the time of writing this, Fiat has withdrawn from discussion, Magna is trying to work out a deal, but increasignly it appears that GM, at the end of the day, is unwilling to sell Opel, despite having agreed to do so before this whole circus started.

The worst that has come of this is the deliberate incompetence of the US Treasury, who, despite repeated requests from the German government to send someone who could make a decision, sent a simple observer. This isn't about a diplomatic affront: the real problem lies in the increasing apparent incompetence of the US Treasury.

This will have repercussions. Perhaps not directly, perhaps not immediately, perhaps not visibly. But the sheer incompetence of the Obama Administration is bungling this is breathtaking.

But, apparently, the Obama Administration can't be bothered.

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