Falling Giants (II) (GM and Opel; Obama in Germany)

http://www.german-foreign-policy.com/en/fulltext/56252

RUESSELSHEIM/DETROIT/OBERWALTERSDORF(Own report) - The US president's brief visit to Germany is being overshadowed by a long-term shift in the balance of power in trans-Atlantic relations. The bankruptcy of the US automobile giant, General Motors (GM), and Berlin's success in forcing it to relinquish its European subsidiaries (Opel, Vauxhall) to a Germany-linked consortium, has led to great losses in the US automobile industry. Getting Moscow involved in the new Opel management and the automobile producer's planned re-orientation toward markets in the former Soviet Union are strengthening the German-Russian special alliance and adding new weight to the breakdown of the nearly 80 years of the German-American corporate alliance. This process corresponds to the constant deterioration in German-American trade relations, while trade between Germany and Eastern Europe, particularly with Russia is steadily growing. The shift in power is being accompanied by a rise of German significance in Europe. The dismantling of Opel's production capacity is mainly affecting plants located outside of Germany.

US President Obama's visit to Germany this week, is being accompanied by a sultry mood in relations between the two countries. The initial cause is the brevity of the visit, in the course of which Obama has declined making representative appearances in Berlin. He will first visit Dresden, which, on various occasions, has been the backdrop for exclusive German-Russian coordination meetings,[1] and then travel to the former Nazi concentration camp Buchenwald, where he will commemorate the crimes against humanity committed during the last phase of German expansion. Otherwise his agenda will only include a meeting with US military units stationed in Germany. The German government had hoped for more recognition. Slogans of praise had already been put on display in Dresden.[2] With the brevity of his stay, Obama has rejected Berlin's attempt to take advantage of his visit.

In the Abyss
Recent developments in trans-Atlantic business relations have contributed to this growing sense of alienation. The collapse of the US automobile industry and last Monday's General Motors (GM) bankruptcy, have been a severe blow to the USA. Soon numerous GM plants, some say between 12 and 20, will have to shut down and at least 2,000 GM car dealers will fall victim to this setback. In 2000 GM still had 195,000 employees, today only 88,000 and more layoffs are pending. The US media predicts a best case scenario of about 25,000 layoffs, if the government subventions do take effect.[3] Having long since lost its rank to Toyota as the world's largest automobile producer, which it had held for decades, GM is now facing utter ruin. Subcontractors are also being affected. Experts estimate that, with the collapse of Chrysler and GM, dozens of them "will be swept into the abyss of insolvency or overextension".[4]

Shaking Off US Predominance
The German government's struggle to disengage Opel has intensified the effects of GM's collapse. GM company headquarters in Detroit had to give up nearly all of its plants in the EU, and even sign over important patents to the Opel headquarters in Ruesselsheim (Hesse, Germany). Thereby, Opel is not threatened with bankruptcy and can continue its production. GM headquarters in Detroit maintains a mere 35% of Opel's shares, 35% go to the Russian Sberbank and another 20% but especially Opel's managerial leadership has been transferred to the Magna Corp. This means that Opel, finally after 80 years, has shaken off US predominance. From now on, the corporation will be practically managed by an Austrian/Canadian company. The automotive subcontractor, Magna (situated in Oberwaltersdorf in the vicinity of Vienna, Austria) is closely linked to the German (Daimler, BMW, Porsche) car makers, and showed proof of its loyalty to Berlin in its partisanship in favor of a controversial Austrian arms project.[5]

Russian Market
Magna also fits comfortably into German projects of industrial expansion in another aspect. Two years ago, the Russian billionaire, Oleg Deripaska bought into Magna with his Basic Element Corp. The Austrian company hopes this will enable better access to Russia's market as well as to the markets of the Soviet Union successor states. In joining Opel, Magna is now profiting from its contacts to Russia, which was only made possible by Russia's Sberbank obtaining 35% of Opel's shares. Cooperation with Moscow's largest credit institution should provide Opel with access to the Russian automobile market, a market, estimated to have enormous growth potential, once the world's economic crisis is over. Therefore, the company in Ruesselsheim will work together with the Russian car maker GAZ, under Magna's management. This prominent manufacturer ("Volga") is owned by the Magna shareholder Deripaska.

From West to East
The shift from trans-Atlantic to German-Russian business relations is in keeping with a long-term tendency of German business: a stunning eastern growth and a stagnation, or even shrinkage, in the west. German foreign trade with Russia rose significantly from 2006 to 2008 (from 53.5 billion to more than 68 billion Euros), simultaneously foreign trade with the USA fell (from 126.5 billion to 117.5 billion Euros). If one includes the commerce with other states in the Russian sphere of influence (e.g. Kazakhstan, Belarus, Ukraine or Azerbaijan), the German volume of foreign commerce with East European - Central Asian countries would be raised to 90 billion Euros, clearly approaching the trans-Atlantic trade volume. When seen in light of the growing sensitive character of German-Russian business activities, this shift in weight begins to take on added significance. In the meantime the business relationship includes arms production [6] and the nuclear industry [7].

German Hub
In addition, the maelstrom of the US automotive giants' downfall reinforces Germany's position inside the EU. With its billions in sureties for Opel, the German government has insured itself essential influence over fundamental decisions, including decisions concerning which plants will be shut down. Whereas Fiat declared that if it joins Opel, it would want to maintain the plant in Antwerp, Belgium and cut back on German plants, Magna, on the other hand, announced that, at the most, it would cut 2,000 of the 26,000 jobs in Germany. Around 20 percent of the 55,000 employees will be laid off throughout Europe - meaning about 9,000 of the 29,000 employees outside of Germany. The Opel plants in Antwerp, Belgium as well as the Vauxhall plant in Luton, England, are facing closure. If the general business focus shifts from a trans-Atlantic orientation to commerce with Russia, the German hub will become even stronger. When this shift in power relations will be reflected on a global scale appears to be merely a question of time.

[1] see also Politischer Zugriff and Munition und Waffen
[2] Seit Tagen fahren die Dresdner Straßenbahnen mit Schriftbändern, auf denen "Welcome, Mr. President" zu lesen ist; Flyer mit dem Titel "Ich bin ein Dresdner" - ein Anklang an den Berlin-Besuch von John F. Kennedy - werden verteilt.
[3] U.S. Bets Billions on GM's Resurgence; The Washington Post 02.06.2009
[4] Staatshilfe verhindert Kollaps der Autobauer; Frankfurter Allgemeine Zeitung 02.06.2009. See also Stürzende Giganten
[5] see also In enger Tuchfühlung mit Berlin
[6] see also Großmachtpläne, Militärkooperation, World's Spy Champion and Strategic Concepts (II)
[7] see also Dangerous Frictions and Nuclear Alliance