Everybody Is Talking About Life After Opel

Opel must feel like someone who's on his deathbed, surrounded by relatives who muse how much the organs will fetch. After we ran our piece on Detroit rumors about Opel and PSA, everybody started to weigh in on the issue. The recommendation by a Wall Street analyst that GM should "dump Opel" made headlines around the world. The Economist mused aloud what an "Opel-less future" would be like. Even here in Chengdu, China, Opel was given up for dead. "Will GM walk away from Opel?" asked one of the slides of Pulitzer Prize winning Paul Ingrassia, Deputy Editor-in-Chief of Reuters, as he gave his presentation at the Global Automotive Forum. Said Ingrassia: "You almost have to wonder: will GM find a way to sort of walk away from Opel? I don't have any inside information, but clearly Opel is a major drag on General Motors right now. General Motors' market share is slipping a bit in the United States, and of course that has to be a concern for General Motors when it faces the difficulties at Opel." Chinese companies were interested in Opel when it was for sale in 2009, and last year, Beijng's BAIC was still rumored to be hot for Opel's corpse. A Opel would be worth much more to a Chinese company than to anyone elsewhere. With a stable of certified cars, and racks of intellectual property, Opel could be the key to developed international markets that currently pretty much remain locked to Chinese carmakers. Several times today, Geely was praised for having done a good job with Volvo so far, and, said Ingrassia, "I would expect to see more Chinese acquisitions of automotive properties in Europe and North America, especially of distressed companies." Walking away from Opel could provide the badly needed lift for the GM stock. Morgan Stanly calculated that cutting off Opel could add nearly $1.00 a share to GM's earnings and could drive the GM stock up by 50 percent. The idea that Opel could be taken out and shot lifted GM's shares by 3.4 percent to $22.49 on Thursday. Meanwhile in Germany, new Opel CFO Michael Lohscheller put on a brave face and told Reuters that "GM signaled its clear support of Opel to me and has a great understanding for the situation in Europe."  That lukewarm statement is not enough to stop the premature eulogies. Says the Economist: "Selling Opel would be painful but, as Morgan Stanley notes, Daimler did right when it accepted the pain involved in cutting itself loose from Chrysler (which is now doing well and keeping its new owner, Fiat, afloat); and likewise BMW when it rid itself of Rover. In retrospect both firms benefited from cutting their losses. It is hard to avoid the conclusion that GM would too."  from The Truth About Cars http://www.thetruthaboutcars.com

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