She sounds pretty pissed. Which is kind of what you’d expect given how she’s always been against the entire auto bailout and its inevitable global market distortions. Even so, GM – which predictably filed for bankruptcy on June 1 – convinced Germany to save their European Opel division in a last-minute deal on May 30, in the midst of the company’s freefall.
The deal, negotiated personally by Merkel even though it cost her massive political capital, had the German government underwrite Opel with the understanding that GM would sell the division, recoup the losses, and repay the loan. In the meantime tons of German jobs would be saved (as opposed to functionally fired right before Christmas, which is what just happened).
A normal company subject to normal market forces could be expected to follow through on the deal, since burning G8 countries after they extend you billions in currency is generally considered poor form. Apparently the board of our government owned auto corporation has different considerations, and they backed out of the deal. Now Germany is demanding their money back, though not before laying the entire mess at at Obama’s feet:
“Without our involvement there would be no Opel today,” Merkel told the Frankfurter Allgemeine (FAZ) daily in an interview to be published on Saturday. “We secured Opel’s chances of survival.” With US parent company GM struggling to survive, Germany gave Opel a “bridging loan” of 1.5 billion euros (2.2 billion dollars) to keep it running and Opel’s 25,000 German employees, half the European total, in a job. In September, GM signed a preliminary deal to sell a majority stake in Opel, a deal backed by the German government with three billion euros in state loan guarantees, but last month GM decided not to sell after all. With Merkel having invested considerable political capital in securing the deal, Berlin was not amused. It is now demanding that GM pay back the money. “Now that the final decision has been taken, GM now has to pay back the bridging loan … It has now taken over the responsibility of financing Opel itself,” Merkel told the FAZ.
You’ll be glad to know that GM’s European spokespeople were pretty cocky about repaying the loan: “if we’re asked, GM will repay the bridge loan in question.” Sure it’s infuriating to see them being generous with US taxpayer money as a way of brushing away their own incompetence. But (a) they’re already bragging about paying back US taxpayer debts with money from US taxpayers and (b) they already gave $1 billion in bailout money to Brazil. Given how much Brazil’s been flirting with Iran, it’d be churlish not to throw some money toward a reliable ally like Germany.
Maybe we can mollify Merkel by reminding her of all the sound economic reasons Democrats gave for the bailout. Like how not doing it would have been unpatriotic and “un-American.” It’s difficult to understand how a plan passed in such a nuanced argumentative context could fare so poorly.
References and related after the jump…
* Merkel warns U.S. over auto bailout [CNN]
* Obama’s new GM CEO: You know, bankruptcy looks really good now [Hot Air]
* Opel would be finished without Germany: Merkel [AFP]
* GM’s Opel move raises anger, new uncertainty [AP]
* When GM says ‘Here’s your money back,’ they really mean it! [Kausfiles]
* GM Is Using $1 Billion of Its Bailout Money In Brazil (Updated) [Gateway Pundit]
* Auto bailout showdown: Lansing mayor versus guy who predicted the financial crisis [Hot Air]
* Gov. Granholm (D-Mich.): Voting Against Auto Bailout "Un-American" [Weekly Standard]