People and Politics Forum 21.11.2008

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Taxpayer's Bailout - Should the German government rescue carmaker Opel?

Many in car-loving Germany think it would be tragic to let the long-standing Opel brand fail because of the US automobile industry crisis. Opel has asked the government to provide a billion-euro loan guarantee if Opel's parent company General Motors declares insolvency. Political leaders in Berlin were quick to act. Chancellor Angela Merkel met with Opel's top executives and vice-chancellor Frank-Walter Steinmeier held talks with works councils. State premiers from German states with Opel production sites have called for action to protect the country's auto industry. The only calls for restraint seem to be from the finance and economy ministers who warn that the government's financial aid could become a bottomless pit.

Our Question is:

"Should governments step in to rescue carmakers?"

Christian Hassmann, in Indonesia, says:

"Governments can and should intervene, and they should use the opportunity to set clear guidelines: cars that run on zero-gasoline, cutting links with the oil industry and making smart, environment-friendly products. That doesn't just save jobs, it also rescues the lives of the human race."

H. F. Dill, in Hongkong, writes:

"Absolutely not! If they go down, most likely a competitor will pick up the pieces and most of the 25.000 - 75.000 'lost jobs' would not be affected. Saving them would only support incompetence and mis-management. If the management were financially prudent and get their parent to settle outstanding bills, there is no need for a bailout."

Chris Dudfield, in New Zealand, notes:

"It's interesting that those great proponents of unbridled free enterprise, the US carmakers should now embrace the concepts of socialism and go begging for handouts with cloth caps in hand. Quite frankly they are corporate dinosaurs and should be allowed to fade into history - along with their spectacularly incompetent top executives, who have effectively sucked these companies dry by awarding themselves excessive pay packets and obscene bonuses without providing any of the necessary management skills. The situation for Opel is different, in that their problems originate largely from the US, where the parent company has completely failed to accommodate a changing global market. It is of course necessary for the German government to assist Opel through this crisis - provided that the company shed the big, fat American albatross around its neck, that all of the money is paid back with interest and that no German taxpayer's money finds its way to GM in the US. Once the current economic crisis is over, Europe and Germany in particular could dominate the world car market. Go for it!"

Charles Smyth, Great Britain:

"Opel is part of US car maker GM, so to offer loan guarantees of more than €2-billion makes it unavoidable for Germany not be supporting GM by one avenue or another. Furthermore, since there is no guarantee that Opel would survive, the government is effectively paying out more than €80,000 per head, for 25,000 Opel employees, which would pay them better than minimum wage for about 4-5 years, and/or pay for re-skilling programmes. Thus it make no sense for Germany to be rescuing Opel."

Martin Burmeister, in Venezuela, says governments can intervene:

"With all the jobs that are directly and indirectly dependent upon the auto industry, the government should, for a limited time, offer guarantees. These should be based on feasible reorganization and refinancing proposals made by the industry."

But Gerhard Seeger, in the Philippines, has his doubts:

"Any assistance provided to banks should be done so as a last resort emergency measure. Yet Opel has gone right to the state trough without even trying other options. Why is that? Providing public funds to Opel now would just encourage other companies to come begging, leading to a money sink. Who knows where it would end? History has taught us that state assistance merely delays a collapse –it doesn’t prevent it. A hasty decision should be avoided. If help is really necessary, then pledges of security or collateral should be stipulated as guarantees from the companies. The crisis has its roots in GM, and to a larger extent, stems from the USA. That’s where the solution should have its roots as well. Otherwise, the US could become a drain for German tax money. All of this is once again proof that the so-called "Top Management" is highly overrated and exhibits nothing close to the competencies that it boasts when it tries to justify its own inflated salary and compensation demands.

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