Hey, Pyrrhic victories all around.
Everybody wins. And loses.
All the parties in this deal may be excused if they woke up this morning feeling like Pyrrhus of Epirus did after beating the Romans in 280 BC. Thinking of his army's heavy losses, Pyrrhus supposedly said, “One more victory like this and we are utterly undone.”
These days, a lot of us can relate.
In a downturn this severe, virtually everybody takes some hits. The Opel deal is just worse than most.
How bad? Here's a clue: cash goes in, but doesn't come out. Magna and Sberbank pay a half billion euros for 55 percent, but GM doesn't get any. The cash stays in Opel. Let's translate this: investors throw money into the sinkhole and hope it doesn't get big enough to swallow them. The German government's 1.5 billion euros? Already in the sinkhole. Another 4.5 billion euros from Germany? The government gets an I.O.U.
So let's go to the scoring.
Opel wins survival in the short term. The cost? About 10,000 jobs still to be cut, and labor strife if the layoffs aren't spread evenhandedly across several European countries.
Magna Chairman Frank Stronach wins his dream of turning the supplier into an automaker. The cost? Magna has tied itself to Russian money and risks losing the trust and ultimately the future business of all the existing automaker customers of Magna.
Russian automaker AvtoGAZ (after Sberbank eventually sells it the bank's stake) wins access to GM technology. The cost? To use GM's technology effectively, GAZ must convert itself to a western-style business plan. That's a huge gamble in a society that still needs big industry more as a job machine than a business. If GAZ succeeds, it must dump maybe 60 percent of its employees.
German Chancellor Angela Merkel wins (perhaps) reelection this month by saving German jobs. The cost? The money already in the pot, for starters, plus potentially more cash and a chance the ploy could still backfire politically if a lot of German jobs go.
GM wins by retaining a partial stake in its European operations and continued access to the fuel-efficient European lineup. The cost? Unless GM won the right to repurchase control of Opel later, there goes its claim to truly being a global automaker. Goodbye, last year's global leader, hello next year's regional automaker.
Everybody in this deal should raise a toast to Pyrrhus: “Here's to no more victories.”