Opel-GM Swap

News media in the United States are reporting that General Motors could file for bankruptcy as early as May. This means that it would be extremely important for Opel to be able to stand alone before GM files for “Chapter 11” bankruptcy protection in the US

Moves to save Opel have advanced considerably. German Economics Minister Karl-Theodor zu Guttenberg has said he will travel to the Gulf region in May, fueling speculation that one of the Gulf emirates may take a stake in the carmaker.

Guttenberg also said that the US and Germany were looking at all the options. “In a conversation with the US treasury secretary," the German minister said "we agreed to set up an informal working group to discuss the next steps to be taken.”

Debt for patents

According to insiders, those steps could include a swap of Opel patents for GM debt. In an extraordinary meeting last Friday, Opel's board of directors reportedly reached an agreement, which German public broadcaster ARD described as a "lifeboat" for the Ruesselsheim-based company.

Opel could demand hundreds of millions of dollars from GM for selling technologies to it in 2005, analysts say, and that would push the US automaker even closer to the brink.

Instead, the “lifeboat” solution means Opel would now get back its patents, which are currently in the hands of the US government, and retract its financial demands.

This, in turn, would substantially lower GM’s debt, making it more interesting to potential investors, while giving Opel the tools it needs to continue building cars on its own.

Jobs better than unemployment

German Finance Minister Peer Steinbrueck has argued that it makes more sense to save the company and the jobs than to put people out of work.

“We’re talking about 25,000 or 26,000 employees and the same number with the suppliers, plus their families," Steinbrueck said. "Unemployment benefits for them would cost between two and three billion euros. So, wouldn’t it make more sense to keep these people employed?”

Analysts say that part of a solution to GM's problems could mean breaking up the automaker into separate "good" and "bad" components. Opel and Swedish carmaker Saab, as “good” components, would become independent with only a minority GM stake. For the “bad”, this means phasing out ailing brands, like Oldsmobile, and maintaining more successful ones, like Chevrolet.

“All we need now,” says Klaus Franz, the head of Opel’s works council, “is enough time to create an Opel-Europe.”