Opel shock

General Motors' decision to back out of selling its German-based Opel unit has sparked a mix of fury and surprise among German politicians, with reaction reaching from condemnation of GM's behavior as "entirely unacceptable," to "shock and annoyance" at Detroit's move.

The announcement was certainly embarrassing for German Chancellor Angela Merkel. It came just hours after she gave a historic speech before a joint session of the US Congress in Washington. The newly re-elected chancellor had invested a lot of political capital backing a deal for GM to sell its troubled European subsidiary to a consortium led by Canada's Magna and its Russian banking partner Sberbank.

Apart from being embarrassing, GM's reversal has created a complicated situation for the chancellor and several German state premiers, said Gerd Langguth, a political scientist at the University of Bonn and Merkel biographer. It is almost as if GM had mugged leading German politicians, he told Deutsche Welle.

And now, no one knows what will happen next.

GM needs cash to restructure Opel

While GM has already declared it will repay a 1.5 billion euro bridge loan the German government had granted in May to keep GM's European operations alive during negotiations to find an investor, Berlin has been non-committal about whether to offer GM fresh government aid to save thousands of jobs at German Opel plants. The US auto giant faces the question of how to come up with the three-billions euros it estimates it needs to restructure its European operations.

But Langguth pointed out that the German federal government is deeply in debt, and needs to try and balance its budget.

“At the moment, Merkel does not have a lot of room for maneuvering,” Lagguth said.

German political leaders may be angry, Bonn political scientist Langguth said, but that was not necessarily true for German taxpayers who had been wondering why state help was needed for the Rüsselsheim-based automaker and were not happy with the government's policy on Opel in the first place.

“The taxpayers don't like to pay the insolvencies of the big companies, while the state would normally do nothing for smaller and medium-sized companies when they are insolvent,” Langguth said. Merkel's previous coalition government with the Social Democrats had made billions of euros in public funds available to prop up companies hit by the crisis.”

Angry Opel workers protest

GM vice president John Smith, meanwhile, said there was very little difference between the offers put forward by Magna and what GM had in mind for Opel. GM announced it planned to cut about 10,000 jobs, almost a fifth of the workers employed by GM in Europe.

Meanwhile on Thursday, thousands of Opel employees in Germany walked off their jobs to join mass rallyes in protest of GM's decision.

There are four Opel plants in Germany, but the future of the plant in Bochum in North Rhine-Westphalia (NRW) is likely to be of major concern for Chancellor Merkel. The prospect of job losses at the plant in Germany's most populous state could cost her Christian Democratic (CDU) party votes in state elections in NRW in May 2010. Should the CDU lose power in the state, Merkel's government would no longer have a centre-right majority in the Bundesrat, the upper house of parliament, and that would in turn allow opposition parties to block legislation.

Author: Dagmar Breitenbach (AFP/Reuters)
Editor: Trinity Hartman