VZCZCXRO7156
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHRL #0390/01 0920539
ZNR UUUUU ZZH
P 020539Z APR 09
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC PRIORITY 3737
INFO RUCNFRG/FRG COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 BERLIN 000390 
 
STATE PASS to EEB/TPP/MTAA Brian Nafziger 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB GM
 
SUBJECT: Chancellor Merkel Clarifies Her Stance on the 
Future of Opel 
 
REF: A) BERLIN 0214, B) BERLIN 0272 
 
ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED.  NOT FOR 
INTERNET DISTRIBUTION 
 
¶1.  Summary. Chancellor Merkel confounded critics and 
pledged to stand by Opel in a speech at the firm's 
Ruesselsheim plant on March 31.  Her remarks were greeted 
by a standing ovation from the workers and widespread 
positive comment by the media.  While ruling out direct 
government investment, the Chancellor pledged to help 
find a private investor, provide state credit guarantees, 
and form a high-powered group to conduct negotiations 
with the U.S. government and General Motors (GM).  Berlin 
is reluctant to take drastic measures to ensure Opel's 
survival until it sees the final outcome of USG efforts 
regarding GM.  End Summary. 
 
 
Merkel Speaks at Opel Plant 
--------------------------- 
 
¶2.  In the speech to Opel management and workers, 
Chancellor Merkel referred to the Obama Administration 
announcement regarding the future of General Motors (GM), 
noting that it gave the company 60 days to come up with a 
viable restructuring plan and pressured GM to change its 
management.  Calling this development a mixed blessing, 
the Chancellor called on Opel, the state governments and 
the federal government, to negotiate with the Americans 
on a plan for Opel's future.  Chancellor Merkel pledged 
to start immediately to lay the groundwork for an "Opel 
Europe" prepared to meet the future.  Noting the frequent 
far-reaching contacts between her government and the 
Obama administration at all levels, Chancellor Merkel 
said they serve as a good basis upon which to build. 
 
¶3.  The Chancellor told her audience the onus is on GM to 
come up with reliable financing and create a new 
structure with sufficient independence for Opel to 
recover.  She reiterated that it is most important that 
the new GM management give its European subsidiary 
sufficient freedom to negotiate for "Opel Europe."  She 
dismissed calls for Opel to sever its ties to GM, stating 
"we need General Motors...and General Motors also needs 
Opel," and this is something "that we cannot...forget." 
 
¶4.  The Chancellor stated that for her, it is not 
critical what percentage of Opel belongs to GM.  However, 
she pledged to help Opel find a private investor 
("naturally with state support - not just from the 
federal but from the state governments") that believes in 
Opel and has the means to rebuild it.  Merkel rejected 
calls for the state to take on this role because 
experience showed it was not the best entity to run such 
a company.  At the same time, the Chancellor promised to 
use government backed securities as a "real bridge to the 
future."  She also pledged that her government would 
treat Germany's smaller parts suppliers with the same 
consideration as big players like Opel, stating that 
"everyone who has earned a chance should get a chance." 
 
¶5.  The Chancellor then announced that she has set up a 
special group under the leadership of State Secretary 
Homann and Economics Minister zu Guttenberg to represent 
German interests in negotiations with the American 
government and GM.  In conclusion, Chancellor Merkel said 
that she had accepted an invitation from Opel management 
to make another visit in 2012 and that she fully expected 
that when she returns she will find "a proud, 
economically viable, efficient, modern, and beloved 
company whose workers say:  we are building the future of 
Germany."  The 3,000 Opel workers present gave her a 
standing ovation after the speech. 
 
¶6.  In their remarks, Opel Head Hans Demant asked Merkel 
for "state help for self-help," GM Europe head Carl-Peter 
Forster, thanked the government for the wrecking bonus 
that helped Opel sell 120,000 cars in the first quarter, 
and Hesse Minister President Roland Koch called on 
politicians to keep a positive attitude towards Opel to 
help it find investors. Koch also agreed to give 
guarantees to assist Opel, while rejecting direct 
purchase of shares by the state.  Union Chief Klaus Franz 
supported Koch's plan for state credit guarantees but 
called for direct state investment. 
 
BERLIN 00000390  002 OF 003 
 
 
 
 
The View from the Economics Ministry 
------------------------------------ 
 
¶7.  (SBU) In a 31 March meeting with ECONMIN, Karl 
Brauner, the Director General of External Economic Policy 
at the Ministry of Economics, confirmed that Minister zu 
Guttenberg is prepared to entertain a rescue package for 
Opel, but faces strong opposition from within government 
circles.  Dr. Brauner said that the German negotiating 
team was quite disappointed by its meetings with GM 
executives Wagoner and Henderson - saying the two had 
"nothing to offer - no ideas - no suggestions."  Asked 
whether Opel would be allowed to undertake worldwide 
sales they could only answer "maybe."  Dr. Brauner 
confided that Opel CEO  Forster had assured him 
categorically that Opel will still be in business and 
making cutting-edge cars in 20 years. 
 
¶8.  (SBU) Dr. Brauner said the common wisdom was that 
Opel cars had over a period of years degenerated under GM 
management and lost their reputation for good quality and 
reliability, resulting in a substantial loss of market 
share.  Brauner pointed out that in German eyes GM 
treated Opel very badly; EMIN countered that GM had in 
fact poured billions of dollars into Opel during its lean 
years. Sadly, Brauner noted, Opel has recently restored 
the quality of its cars, and its new Insignia model is 
highly regarded, but has lost out in the marketing battle 
because of its association with GM. 
 
 
Reaction from an Opel Insider 
----------------------------- 
 
¶9. (SBU) Uwe Berlinghoff, Opel's Director of Government 
Relations, provided us with his reactions to the speech 
on 1 April.  Describing the Opel reaction as "very 
positive," Berlinghoff remarked that Merkel was far more 
positive than the company had expected.   Berlinghoff 
applauded Merkel's promises to found a working group to 
intensify contacts with the USG on issues that only the 
two Governments can resolve and her affirmation that she 
wanted to use the 60 days to found an Opel Europe. 
Berlinghoff confirmed that the Chancellery has already 
asked Opel to consult on issues that Opel and GM are 
unable to resolve on their own. 
 
¶10.  (SBU) Likewise, Berlinghoff was not unhappy about 
Steinmeier's 10-point rescue plan, as it increased 
pressure on Merkel.  On GM, Berlinghoff said Fritz 
Henderson has been the strong man at GM for months now 
and  characterized him is a "man of action rather than 
words," with substantial experience in restructuring GM 
Europe a few years ago.  Berlinghoff confirmed that 
financially Opel can hang on for another 60 days, while 
predicting that Opel's 2nd quarter results would be below 
those of the 1st quarter, as the effects of the wrecking 
premium start to recede. 
 
 
Comment 
------- 
 
¶11.  Comment: Merkel's speech made the best of a bad 
situation.  First, she had to counter the 10-point Opel 
rescue plan that Former Minister Steinmeier's, the SPD's 
Candidate for Chancellor, had presented on March 30 
advocating state ownership and the creation of a task 
force to proactively push the rescue of Opel.  Merkel 
deftly accomplished this by appointing the Working Group 
under the popular zu Guttenberg.  (In fact, she merely 
renamed the key people already working the Opel problem 
while adding an investment banker or two.)  The 
Chancellor also had to balance an internal CDU/CSU 
dispute over state aid for Opel.  She did this by 
promising the government itself would not take over the 
firm, thereby appeasing the right wing of the CDU/CSU. 
And finally, she bought time while the USG worked out a 
deal with GM.  In the end, the German government will 
likely rescue at least a large portion of Opel.  The 
problem is that without a private investor, it will be 
difficult to do so without substantial government 
intervention, something that would cost Merkel voters in 
the September elections. End Comment. 
 
BERLIN 00000390  003 OF 003 
 
 
 
 
Koenig