GM May Take Opel Into Bankruptcy

GM may have learned something from its US-government backed bankruptcy in America. A car company can make it through Chapter 11 successfully and live to have its balance sheet better off and its operations more efficient.

GM’s board says it will announce its plans for its Opel units soon. One of its options is to allow its European operations go through bankruptcy and then continue to operate them rather than selling Opel to one of several buyers who have made bids.A trust controlled by the German government holds Opel’s fate, but that may not be true if the company becomes insolvent. In a bankruptcy filing GM might have to bid for the Opel assets but it is more intimately knowledgable about the European car company’s operations than any other bidders which might allow it to offer slightly more money for the assets.

GM would be playing a high stakes game with Opel’s unions. They might choose to shut down critical plants to make a bankruptcy filing more expensive by shuttering critical production. GM may counter by letting the unions lose thousands of jobs if a court allows new labor agreements to be set to save money so that Opel can stand on its own by next year.

The new GM board is proving much tougher than the old one. It may well take a gamble to keep Opel by trying to face down the German government and the unions.

Douglas A. McIntyre