VZCZCXRO0589
OO RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHRL #0605/01 1420525
ZNR UUUUU ZZH
O 220525Z MAY 09
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4166
RUEATRS/DEPT OF TREASURY WASHINGTON DC
INFO RUCNFRG/FRG COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 BERLIN 000605 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD ELAB PGOV GM
SUBJECT: Opel Rescue Effort Enters Critical Stage 
 
REF: A) BERLIN 0569 B) BERLIN 0272 C) BERLIN 0214 
 
¶1. (SBU) Summary.  Opel's "rescue" enters a critical stage as 
the government's 6:00 pm May 20 deadline for investor bids 
looms.  In preparation, the federal government, the German 
states where Opel factories are located, and several state- 
owned banks agreed in principle on May 19 on a roughly 1.5 
billion euro "bridge loan" to tide Opel over until 
arrangements can be made for new ownership.  The government is 
also actively considering an independent trust for the bridge 
financing, but has made no formal decision.  Complicating 
German government decision-making is the anticipated Chapter 
11 bankruptcy for GM at the end of May.  German Economics 
Ministry officials have been in frequent contact with U.S. 
Treasury, but acknowledge (contrary to German media reports) 
that Treasury has not taken a position on the "trust" concept 
the German cabinet may consider next week.  German media also 
widely reported that Economics Minister zu Guttenberg will 
lead a delegation to Washington this weekend, but Chancellery 
and Ministry contacts denied that any such trip is scheduled 
at this time. End Summary. 
 
¶2. Due in part to the sensitivity of business proprietary 
information, the German Economic Ministry and other agencies, 
including the Chancellery, have been unusually mum about the 
Opel issue.  As a result, the media has issued conflicting, 
and often false, reports based largely on hearsay and rumors. 
This report attempts to identify what we know (or think we 
know) and what we do not know about certain key questions on 
the ongoing Opel saga, based in part on conversations that 
EMIN and Econ Counselor had May 20 with senior Chancellery and 
Economic Ministry officials who are involved in the 
discussions. 
 
 
Ownership of the "New Opel" 
--------------------------- 
 
¶3. (U) The Chancellor and her party have consistently rejected 
state participation in Opel.  Even the SPD, which once 
supported a state share in Opel, now agrees with its coalition 
partner, the CDU/CSU, on founding a "trust" administered by an 
independent entity.  This would enable Opel to access loans to 
tide it over until new ownership takes control and, at least 
superficially, avoids the appearance of a government share in 
Opel.  Underlying this consensus is a broad awareness of how 
difficult it would be to extricate the government from running 
the company once it became a co-owner. 
 
¶4. (SBU) A Chancellery official acknowledged to the Embassy 
that the decision on an investor and the size of its stake in 
Opel is up to GM to determine in its negotiations with 
potential buyers, not the government's.  For the Government, 
he said, the primary criterion is whether the investor(s) can 
offer a long-term business plan for a profitable, viable Opel 
although clearly they would like to save as many plants and 
jobs as possible.  Senior Economics Ministry and Chancellery 
officials repeatedly emphasized that to date the Cabinet had 
made no formal decisions on any key issues, including creation 
of an independent trust.  The Cabinet may be forced to make 
some hard choices in its next meeting on May 27, as this will 
be the last cabinet meeting before GM is expected to become 
insolvent on May 29. A senior Chancellery contact stressed, 
however, that even then, everything will depend on how the 
bids for Opel look and how discussions proceed with GM. 
 
 
The Contenders 
-------------- 
 
¶5. (U) At least three bidders are expected to submit offers by 
this evening's deadline.  Fiat, now cooperating with Chrysler, 
has gone to great lengths to lobby for support at the federal 
and state level, but is faced with serious opposition from 
both Opel and its own employees who suspect Fiat will close 
plants throughout Europe and cut up to 18,000 jobs in the two 
companies once they are merged.  Press reports say Fiat and GM 
have been unable to agree on a GM share to date with Fiat 
advocating a GM 20% share and GM wanting 40%.  It is also 
unclear how much cash Fiat would actually bring to the table. 
 
¶6. (SBU) Even less is known about other prospective suitors. 
Canadian-Austrian auto parts manufacturer Magna is expected to 
bid for up to a 20% stake while its partners Russian auto 
manufacturer Gaz and the Russian State Bank (Sberbank) may 
perhaps take 30%, with GM retaining 40% and Opel dealers and 
employees the remaining 10%, according to press stories.  A 
senior Opel representative told us that the Magna concept 
would require strong GM participation.  U.S. finance investor 
 
BERLIN 00000605  002 OF 002 
 
 
Ripplewood is also expected to participate as may other 
financial investors.  Although some reports have suggested 
Ripplewood is already out of contention, our Chancellery 
interlocutor made reference to the possibility of a 
"consortium" of financial institutions taking over Opel. 
Opel/GM will forward its initial assessment of the bids to the 
Federal Government as soon as possible.  Minister zu 
Guttenberg has stated that if no offer is acceptable, Opel 
will go into controlled insolvency. 
 
 
Bridging Loans for Opel 
----------------------- 
 
¶7. (U) Just 24 hours before the expiration of the May 20 
deadline for bids, the Federal Government, interested states, 
and several state-owned banks (including KfW) agreed on a 1.5 
billion bridge loan package (other estimates range between 1-2 
billion Euros).  Opel itself had claimed it urgently needed 
1.2 to 1.3 billion.  The federal and state governments would 
guarantee the loans, which would require the approval of the 
Bundestag's Budget Committee, but not the entire parliament. 
The funds would be available as "a bridge" until a new 
investor can take over.  Not only do the modalities of new 
Opel ownership have to be legally clarified but, according to 
Hesse Minister President Roland Koch, Opel itself would have 
to go through the registration process to obtain a separate 
European legal identity for its new ownership structure. 
Unnamed Government sources say that October is the deadline. 
If the issue is not resolved by then, Opel would go into a 
controlled insolvency. 
 
 
The U.S. Angle: zu Guttenberg to Washington? 
--------------------------------------------- 
 
¶8. (SBU) The media has repeatedly reported that an Opel Task 
Force led by Economics Minister zu Guttenberg - perhaps 
including  representatives from the Chancellery, Economics and 
Finance Ministries - would travel to Washington over the 
weekend to negotiate details of the deal with the U.S. 
Treasury (and GM).  Senior officials from the Economics 
Ministry and the Chancellery confirmed to Embassy that there 
are no concrete plans to travel at this time.  According to 
the Chancellery, nothing will happen until Chapter 11 and 
other key decisions on GM become clearer. 
 
 
German Views on U.S. Treasury Role 
---------------------------------- 
 
¶9. (SBU) Contrary to media reports that the U.S. Treasury was 
"blocking" a deal, the Economic Ministry stated that Treasury 
"has not taken a position" on the German trust concept and 
implied that it would make their lives easier if the USG did 
decide one way or the other. A senior Opel representative 
claimed on May 19 that he had the impression the U.S. Treasury 
was entirely focused on GM North American activities and had 
no interest in its European operations.  Despite these mild 
grumblings, however, few observers, even in the media, are 
placing the bulk of the blame for Opel's plight on the USG or 
GM, as there is a general recognition that it is part of a 
worldwide crisis in the industry. 
 
 
The Role of the EU 
------------------ 
 
¶10. (U) The German Government may also need the approval of 
the EU Commission and other member states with Opel plants. 
The independent trust would not require approval, but a loan 
package with 100% financing by state-run banks would.  Yet 
other member states are not expected to object to interim 
German funds to keep Opel afloat.  The crunch may come when a 
successful bidder emerges, as it will almost inevitably 
involve plant closures somewhere in Europe as well as job 
cuts.  However, our Chancellery contact noted ongoing talks 
with the EU and was optimistic that EU approval will be 
forthcoming. 
 
Koenig