Opel's troubles

There is no foreseeable end to the wheeling and dealing surrounding Opel. And consequently, no end to the haggling for state aid - in other words, for taxpayer's money. Once again, German state politicians cannot resist portraying themselves as saviours.

Wherever interim head of Opel Nick Reilly showed up this week - whether in North Rhine-Westphalia, Rhineland-Palatinate, Hesse or Thuringia, all states with Opel plants - state premiers played the concerned father figure.

What they promised the Opel boss we do not know. But it is not difficult to guess: money, of course, money for jobs. And it has helped, at least a bit: the four German Opel plants will stay, albeit with smaller workforces. Thousands of jobs will be cut.

This was not unexpected. And it would be wrong to delay the urgently needed restructuring of the battered auto industry with taxpayer's money.

Aside from that, 9,500 jobs across Europe are to be lost according to General Motors' (GM) plans. Magna, which was consistently favoured by politicians as Opel's new partner, had also suggested a similar figure. Then, three weeks ago, GM made an about-turn and halted the sale of Opel to Magna, just before it was finally completed.

Berlin's first reaction: give the money back. After all, the government had granted Opel a loan of 1.5 billion euros to tide them over. Now GM has paid the money back and in Berlin they are proudly saying that the money's all been returned and the tax payer has not had to give a cent to save Opel.

That is not wrong, but it does not take into account the following: GM is bound to get its begging bowl out again. It is hard to imagine that the Americans on their own can afford the billions of euros worth of restructuring needed for their European subsidiary Opel.

GM is still in the red. It will be a long time before the company is finally on the road to recovery. Many predict that for the global auto industry the hard times are still ahead. China's crucial car market has not developed as much as hoped.

Even in Russia - which was so keen to beef up its own flagging auto industry with Opel's help - prospects are not rosy. But the biggest unknown is the US. The car industry there is still regarded as extremely important, but the outlook is bleak.

At the beginning of the week, the European Commission asked all the economics ministers of the countries where Opel has plants - Germany, the UK, Belgium, Poland, Italy, Austria and Hungary) - to a round table. The aim of the meeting was to prevent a subsidies war breaking out.

Of course it is tempting to offer money to prevent a factory from being closed. But whom does that help? The auto industry reached over-capacity years ago. Simply too many cars are being built. Production has to meet demand, even if this is a painful process.

Taxpayer's money was not able to keep the glorious European textile industry from going under either. Today, other industries are also struggling to survive and - justifiably in view of the help the car industry has received - are holding out their hands to beg for state aid. But this is the wrong path to go down.

Of course social security systems have to be resilient enough to cushion such changes in structure. But keeping the structure in place is, sooner or later, just not possible.

So back to Opel: a justified sigh of relief will be heard from the German factories. After the months of wrangling, the workers cannot be grudged their good news.

But they know well enough themselves that the end of the story is still a distant prospect.

Henrik Boehme is a business reporter at Deutsche Welle (hl)
Editor: Michael Lawton