Having spent much of last week in the US kicking the tyres of now-bankrupt Chrysler, Fiat boss Sergio Marchionne is back on this side of the pond and eyeing up the European end of GM - essentially the Vauxhall and Opel brands - in hopes of picking up a firesale bargain.
He may well be onto something, as GM is rapidly running out of road and needs to be seen to be taking radical steps if the supply of US government cash (which is keeping it going) is not to be withdrawn. Getting rid of Opel in Germany and Vauxhall in the UK would certainly be a start. (Strictly speaking, Saab is also part of GM Europe, but unlikely to be included in any sell off as it is already being restructured under Swedish law).
To this end, Marchionne has been assiduously wooing the German government with promises that, should the deal go through, he will keep the three Opel factories in Thuringia open, safeguarding the 26,000 jobs there. But he does want to borrow up to €7bn from the government (i.e. the EU) to finance the deal. That’s about €270,000 per job, which seems plenty to us. But then, potential buyers for the two brands aren’t exactly queuing round the block, so it may be a case of Hobson’s choice.
Marchionne's interest in GM Europe is the same as his interest in bits of Chrysler: growth. Fiat makes stylish small cars that cash-strapped and eco-aware punters like to buy – more than most manufacturers can claim these days. But the margins on Pandas and Cinquecentos are so small it needs to shift a lot more of them if it is to secure a long-term future. So Marchionne is taking a big gamble, but he probably doesn’t have much alternative.
If the deal goes through, what will it mean for the UK? Union leaders and industry commentators seem more or less agreed that the prospects for the 5,000 jobs at Vauxhall’s Luton plant under Fiat ownership would not be rosy. Their reasoning goes something like this: ‘GM Europe has too many factories. Any new owner, especially one like Fiat which already has its own manufacturing capacity, would want to make economies. The factories which commercial logic suggests should go are those with the highest costs, i.e. the ones based in Germany or run by Germans. But realpolitik – a game very well understood by both Germans and Italians – makes the Vauxhall plant in Luton look like the softest closure target.’
So the British taxpayer could end up footing at least part of the bill (via its EU contribution) for a takeover whose immediate consequence would be the loss of up to 5,000 British jobs. Even by current extraordinary standards, that’s a pretty rum deal.
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