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NINETY EIGHT REGENCY

Switch on Opel shows GM can change

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Switch on Opel shows GM can change

Don't pay much heed to the wailing from Germany about General Motors Co.'s decision, after all, to keep its Adam Opel GmbH unit.

Because, in the end, prodding in the European Union by the Dutch, the Belgians and the Brits forced the German government to give GM's new board of directors the escape hatch it decided to use. This says as much about GM's directors under Chairman Ed Whitacre as it does about the German proclivity to rig the Opel game and then blame others -- the Americans -- when it all falls apart.

Namely, the outside directors charged with overseeing the management of the post-bankruptcy GM are willing to act like directors, to change their collective mind if conditions change, even at the risk of provoking outrage from Rüsselsheim to Berlin and in between. The old board? More likely to cling to an original decision, not ask probing questions, and then spend years denying that a manifestly bad call is just that.

The $2 billion (and counting) debacle with Fiat SpA comes to mind. So does the acquisition of Hummer, the endless propping up of product-starved Saab, the under-investment in Saturn, the push of GMAC into the risky end of residential mortgages, the boomerang "spin-off" of GM's Delphi parts unit and, of course, that monument to bad calls masquerading as "innovation" -- the Pontiac Aztek.

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It's all history, yes. But like any smart reader of history knows, the past often can inform the present and offer context for the future. In the Opel turnabout, there's clear evidence GM's board is willing to shift gears amid changing circumstances, be they financial, political or strategic. Which, in this town and at that company, is a very good thing.

GM's directors intensely debated the future of Opel over a dinner meeting last Monday, hours before voting the next day to keep the Germany-based automaker. Several people familiar with the debate described the discussion as "very active" among more than a few of the directors, most of whom are new to the GM board.

The board's decision also says something, it seems to me, that too many are willfully overlooking: By its actions, the new board is validating GM's pre-bankruptcy strategy to keep Opel, restructure it and reassert its value in the global GM. And, second, the new board's decision is a vote of confidence in the ability of current management to actually get the job done.

Forever? No. For now? Yes, which is the most existing management, starting with CEO Fritz Henderson, can expect as the post-bankruptcy GM picks its way forward amid an uncertain economy and a skeptical car market. Nothing is certain.

For months, the sale of GM's Opel to a consortium of Canada's Magna International Inc., Russia's Sberbank and Opel's employees hurtled toward a conclusion pre-ordained by policy makers in Berlin, their friends among German labor and even German executives inside GM-Opel. Yes, that included the likes of Carl-Peter Forster, the president of Opel-Europe now leaving to, ahem, pursue other interests.

GM's financial condition, so dire when the Magna-Sberbank deal was pushed in advance of German national elections, changed. GM's board -- newly seated, new to the Opel deal and, in many cases, new to the auto industry -- changed its collective mind. Why? Because a letter from the German government, in answer to a query from the EU's competition commissioner, clearly signaled that it could.

Financing for an Opel workout, the Germans told GM, would be available for any transaction GM considered best suited for Opel -- not just the Magna-Sberbank deal that German negotiators in government and labor clearly preferred. In retrospect, the multi-party German political finagling undercut its own position.

"It was a very close call. Conditions have changed," a source familiar with the board's evolving deliberations over Opel told me. "We know we can do it. We're now able to do it."

Today, GM's senior management is expected to wrap up an extensive review of its planned restructuring of Opel, which the automaker expects to spend less money doing than the Magna-Sberbank workout envisioned. In coming weeks, GM representatives likely will share the revised plan with European governments, including Germany, Spain, Poland, Austria and the United Kingdom.

Not exactly what the Germans wanted, but an outcome they helped deliver -- however furiously they try to spin it now.

link:

http://www.detnews.com/article/20091110/OPINION03/911100340/1148/rss25

Edited by NINETY EIGHT REGENCY
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