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Government Motors and Foreign Political Entanglements

Posted By James Gattuso On August 26, 2009 @ 1:41 pm In Economics | Comments Disabled

The Obama Administration’s claims that General Motors — the federally-owned auto manufacturer — is independent from political entanglements is once again being tested, this time with an international twist. The issue is what to do with Opel, GM’s German-based European subsidiary (as well as the smaller, British-based Vauxhal). Last week, GM CEO Fritz Henderson presented [1] to the GM board a plan to sell the two firms to a Canadian-Russian consortium. Surprisingly, however, GM’s board rejected the plan, asking Henderson to consider other options. Those option include GM keeping Opel, or accepting a competing offer from a U.S. private equity firm.

The non-decision has set political sparks flying [2] in Berlin. Chancellor Angela Merkel’s government, facing a close election next month, has been pushing hard for the Canadian-Russian deal, even promising $6.4 billion in loans to sweeten the deal. The fear is that under a U.S.-owned GM, German jobs at Opel would be at risk. Ownership by an American private equity firm, in German eyes, would be even worse.

The situation has set off a tizzy of international politicking, with the German foreign minister raising the issue directly with Secretary of State Hillary Clinton on Saturday. The Obama Administration, to its credit, has so far resisted the urge to get involved in the imbroglio, saying the decision is up to GM’s board. But its a no-win situation for U.S. diplomats. The slightest hint of an opinion by Administration officials — intended or not — could affect the decision, or perceptions of it. Even absolute neutrality may come at a political cost, causing diplomatic headaches with Germany, and perhaps Russia and Canada to boot.

U.S. officials no doubt hope the whole issue will go away. But the fact is that — as long as the government is the majority shareholder — it won’t. Ownership comes at a cost.

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URL to article: http://blog.heritage.org/2009/08/26/government-motors-and-foreign-political-entanglements/

URLs in this post:

[1] presented: http://online.wsj.com/article/SB125114535906254779.html

[2] political sparks flying: http://www.detnews.com/article/20090826/AUTO01/908260325/1148/Future-of-Opel-is-hot-topic-in-Germany

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