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I. INTRODUCTION
The
Weltfinanzkrise slammed into the
world automotive industry with hurricane force on Sunday, September 14,
2008,
when Lehman Brothers sought bankruptcy relief.
The stock market selloff and other market dislocations that this
bankruptcy
filing induced ultimately caused the rapid plummeting of motor vehicle
sales in
North America, Europe and elsewhere. General Motors Corporation and its
European
operations of Opel, Vauxhall and Saab were especially hard hit,
eventually
forcing GM to market those operations.
While GM agreed to sell its Saab brand separately in the context of
Swedish insolvency proceedings, GM elected not to seek bankruptcy relief
for
the Opel/Vauxhall units but to market them through a private bidding
process
conducted in the Spring and Summer of 2009.
On
September 10, 2009, after many twists and turns during the months-long
negotiation process, GM announced that it would sell a 55% equity stake
in Opel
to a consortium consisting of Magna International, Inc., a global Tier I
automotive supplier, and Sperbank Rossii, a Russian bank with
connections to
GAZ Group, a Russian auto manufacturer. Germany
agreed to support this acquisition through €4.5 billion in loan
guarantees to
be made by the federal government and the governments of the states
where Opel
maintains plants. Shortly after this
announcement, the Belgian and Spanish governments, in which countries
Opel
factories are also located, complained to the European Union's
Commissioner for
Competition, Neelie Kroes, that GM's selection of Magna/Sperbank as the
winning
bidder was improperly influenced by Germany's promise of discriminatory
state aid and, therefore, ran afoul of The Treaty of Rome and EU
competition
laws. These complaints drew a warning
from Neelie Kroes to Germany
that the proposed acquisition appeared to violate the competition laws
of the
European Union. In the wake of this
intra-European Union dispute, GM management reversed its decision and,
on
November 3, 2009, announced that it had decided to cancel the proposed
sale and
retain Opel/Vauxhall as an integral part of the "New GM."
The
Opel saga, which is related in this article, has a "soap opera" quality
to it;
it is a story of a behemoth, multi-national corporation teetering on the
precipice of financial collapse while election-oriented politicians and
savvy
businesspeople jockey for advantage.
This story nevertheless raises important issues about how EU state aid
can be used and, sometimes, misused and whether an Opel insolvency
proceeding
would have been a faster and more dependable vehicle for its sale.
These are the basic issues that are addressed
in this article.
II. THE PLAYERS AND THEIR
ROLES
A. General Motors Corporation
General
Motors Corporation ("GM") was incorporated in 1908 through the efforts
of
William Crapo "Billy" Durant, a swashbuckling, turn-of-the-century
entrepreneur, through the consolidation of 13 automobile companies and
10 auto
suppliers. GM steadily grew in size and
stature under his direction and that of Alfred P. Sloan, who succeeded
Durant
as GM President in 1923. In the early
1930's, GM overtook Ford Motor Company as the auto sales leader in the
United
States and maintained that position for 70 years. The 21st
Century, however, has not
been kind to GM. General Motors' share
of the U.S. motor vehicle market has shrunk from 50% in the 1950s to 20%
as of
January 2010. From September, 2008 to
the present, GM has run through three CEOs, (i) George Richard ("Rick")
Wagoner, Jr., who resigned under government pressure in May, 2009; (ii)
Frederick A. ("Fritz") Henderson, who resigned under board pressure in
December, 2009; and (iii) Ed Whitacre, who presently occupies this post.
In
1929, GM acquired 80% of the Opel's stock and, two years later,
purchased the
remainder from the Opel family.
Immediately prior to World War II, Opel was the largest manufacturer of
motor vehicles in Europe but, in 1940, on directions from the government
of the
Third Reich, Opel was directed to cease civilian manufacturing and shift
to
wartime production. In 1946, GM
reasserted control over Opel, rebuilt its bombed-out factory in
Rüsselsheim, and resumed producing vehicles for the
European market. Although Opel
manufactures non-luxury cars for lower-income buyers, the Technical
Development
Center in Rüsselsheim is a critical center for GM's global research and
development of small-car and electric automobile technology.
B. Opel
Adam
Opel established Adam Opel GmbH in Rüsselsheim, Germany in 1863 as a
manufacturer of sewing machines. In
1886, Opel began to produce bicycles and, in 1899, switched to the
assembly of
motor vehicles. By 1914, Opel had become
the largest automobile manufacturer in Germany.
Upon Opel's post-World War II rejuvenation, Opel resumed civilian
vehicle production and became one of the icons of Germany's Wirtschaftswunder
in the 1950s and
1960s. Although its market share has
decreased since those heady days, Opel remains an important brand in
Europe. Opel has three auto assembly
plans in Germany - - in Rüsselsheim (State of Hesse), Bochum (State of
North
Rhine-Westphalia) and Eisenach (State of Thuringia), and an engine plant
in
Kaiserslautern (State of Rhineland-Palatinate).
Other Opel/Vauxhall plants in European Union member states are located
in the United Kingdom (Ellesmere Port and Luton), Belgium (Antwerp),
Spain
(Zaragoza) and Poland (Gilwice).
Approximately 24,700 of Opel employees are located in Germany, more than
58% of the concern's total employees.
C. European Union
The European Community was created in 1957 when
representatives of France, Germany, Italy, Belgium, Luxembourg, and the
Netherlands signed the Treaty of Rome creating the European Community,
more
popularly known as the Common Market.
Although the EU began primarily as a free trade organization, it
gradually developed into a political and monetary union with a number of
countries sharing a common currency, the Euro.
Now known as the European Union, this supra-national organization
encompasses 27 countries of which 16 belong to the Eurozone.
The
EU has three primary governing bodies, (i) the European Parliament, (ii)
the
Council of the European Union, and (iii) the European Commission. The
European Parliament is made up of elected
representatives whose primary function, which it shares with the Council
of the
European Union, is to pass European laws proposed by the European
Commission. The Council is the EU's
primary decision-making body and is also responsible for foreign,
security and
defense policies. Ministers from all of
the member states sit on the Council.
The European Commission is the executive organ of the EU that is
obligated to draft proposed legislation for presentation to Parliament
and the
Council, to manage the day-to-day business of implementing EU policies
and to
enforce EU treaties and laws. The
Commission is headed by a President selected by EU member states and
endorsed
by Parliament. There are 27
Commissioners, one representing each member state, who are responsible
for
overseeing specific policy spheres, e.g., Industry and Entrepreneurship,
Environmental, Development, Economic and Monetary Affairs and
Competition. In 2008 and 2009, the Commissioner for
Competition was Neelie Kroes of the Netherlands.
As
will be discussed in greater detail in Part IV below, financial aid
granted by
an EU member state to local businesses is restricted by various EU
treaty
provisions and laws that are enforced by the European Commission.
Included among these laws are Articles
107-109 of the Treaty of Lisbon, which generally prohibit state aid that
"distorts or threatens to distort competition by favoring certain
undertakings"
as being "incompatible with the internal market."
D. The Government of The Federal Republic
of Germany
From
September, 2005, to September 27, 2009, the Federal Republic of Germany
was
governed by a "Grand Coalition" of political parties that included the
Christian Democratic Union (CDU), its Bavarian ally, the Christian
Social Union
(CSU), and the liberal Social Democratic Party (SPD). Angela Merkel of
the CDU was (and remains)
the Federal Chancellor while her Vice-Chancellor, Foreign Minister and
main
political opponent prior to September 27, 2009, was Frank-Walter
Steinmeier of
the SPD. The Economy Minister during
most of the period covered by this article was Karl-Theodor zu
Guttenberg of
the CSU.
On
September 27, 2009, the nationwide elections to the Bundestag, the
national
parliament, resulted in a victory of the conservative parties: the CDU,
CSU and
the FDP, the free-market oriented Free Democratic Party. These parties
thereafter formed a coalition
government, which presently governs Germany.
Although the issues of whether and how to rescue Opel threatened to
become an election issue before September 27th, this
controversy was
defused after GM announced prior to the election that it had selected
the
Magna/Sperbank consortium as the winning bidder.
E. The Governments of the United Kingdom,
Belgium and Spain
The United Kingdom, Belgium and Spain are all EU member
states in which Opel/Vauxhall maintains manufacturing facilities. The
Astra and Vivaro automobiles are
assembled in two UK plants, Ellesmere Port and Luton, which together
employ
approximately 4,475 workers. Antwerp, Belgium is the home of an Opel
assembly
plant that produces the Astra; this facility employs approximately 2,400
workers. Another assembly plant is
situated near Zaragoza, Spain, which
assembles the Corsa and Meriva models and has 6,400 persons on the Opel
payroll. The governments of all three of
these countries were active during the Opel sale process in protecting
their
national interests, including the interests of their citizens who were
Opel
employees. Especially active in these
efforts were (i) Baron Peter Benjamin Mandelson, the Secretary of State
for
Business, Innovation and Skills and the President of the Board of Trade
in
Britain's Labour government; (ii) Belgian Prime Minister (and now EU
President), Herman Von Rompuy; (iii) Flemish Prime Minister, Kris
Peeters; and
(iv) Elena Salgado Mendez, the Second Vice President and Minister of
Economy
and Finance in the government of Prime Minister Jose Luis Rodriguez
Zapatero.
F. Magna International, Inc.
Magna
International, Inc. is a global, Tier I auto supplier that describes
itself on
its website, www.magna.com,
as being
"the most diversified automotive supplier in the world" that designs,
develops
and manufactures "automotive systems, assemblies, modules and
components" and
also engineers and assembles "complete vehicles, primarily for sale to
original
equipment manufacturers (OEMs) of cars and light trucks" throughout the
world. Magna has 242 manufacturing
operations and 86 product development, engineering and sales centers in
25
countries. Magna's corporate
headquarters is in Aurora, Ontario, Canada, and has a key assembly plant
in
Graz, Austria.
Magna
was founded by Frank Stronach, a native of Austria who emigrated to
Canada in
1954 and, three years later, founded Magna's predecessor, Multimatic
Investments Limited, a tool and die company.
In 1969, Multimatic merged with Magna Electronics Corporation Limited,
which thereafter grew into the industrial giant that it is today.
G. Sperbank Rossii
Sperbank
Rossii, which in English is named the Savings Bank of the Russian
Federation,
was established in 1841 and thereby claims the title of the oldest bank
in
Russia. Its primary shareholder is the
Central Bank of the Russian Federation, otherwise known as the Bank of
Russia,
which owns approximately 60% of Sperbank's voting shares. Sperbank,
with its headquarters in Moscow,
maintains over 20,000 branches throughout Russia and has banking
subsidiaries
in the Ukraine and Kazakhstan. Sperbank
touts itself on its website, www.sbrf.ru/en,
as being
"the largest bank in Russia" holding "over a quarter of national banking
assets." Sperbank's President and CEO is
German Oskarovich Gref, an ethnic German who was born in the former
Soviet
Republic now known as Kazakhstan. Gref
was trained as a lawyer and acted as Vladimir Putin's Minister of
Economic
Development and Trade from 2000 to 2007.
H. The GAZ Group
The
GAZ Group is a Russian automotive manufacturer with manufacturing
facilities in
the cities of Nizhny Novgorod (also its corporate headquarters) and
Yaroslavl. This OEM was created in 2005
through a restructuring of RusPromAuto's production assets and is
controlled by
Oleg Deripaska, commonly referred to in the media as a "Russian
oligarch," who
owns approximately one-third of its equity.
The Chairman of the Board of Directors is Bo Andersson, who prior to his
joining GAZ in June, 2009, was the head of global purchasing at GM.
Another board member is Siegfried Wolf, a
native Austrian and Co-CEO of Magna.
GAZ
Group advertises itself on its website as "Russia's largest automotive
manufacturer of light commercial vehicles, trucks, buses, cars, diesel
engines,
power-train components and road construction equipment", eng.gazgroup.ru.
GAZ manufacturers the Volga Silber passenger
automobile, and the Gazelle and Sobol minibuses. During the
negotiations for the sale of Opel
to Magna/Sperbank, it was reported that GAZ would ultimately acquire the
equity
share to be allocated to Sperbank, thereby making the GAZ Group a
possible
recipient of GM's highly-prized Opel technology. GM is also a
competitor of GAZ in the Russian
market, where GM sells its Chevrolet Cavalier passenger car. [footnotes
omitted]
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