- The Washington Times - Tuesday, August 25, 2009

ANALYSIS/OPINION:

The cascading effects from GM’s bankruptcy and its reorganization into a new, government- and union-owned company are still being discovered. One of the most important relates to a European subsidiary of GM, Adam Opel GmbH.

It’s a complicated story, but the essence is this: As GM entered bankruptcy worldwide, it shed some brands as part of its restructuring, such as Pontiac and Saturn in the U.S. In Europe, the company is selling Opel, which is now surviving thanks to a direct subsidy from the German government.

Opel is a strong brand with cutting-edge engine and safety technology, but GM could not afford to keep all its brands. GM will retain some ownership share and is negotiating with the German government over public financing for the deal. It’s facing pressure to complete a deal quickly, given the upcoming federal elections in Germany on Sept. 27.

There are two candidates to take over Opel. One is a Belgian investment firm widely believed to be a stalking horse for an eventual resale to GM. The leading candidate, though, is Magna, a Canadian-owned parts manufacturer, backed by a Russian state-owned bank, Sberbank. Magna currently produces cars under contract for the Big Three and for BMW, so it is potentially a very strong competitor.

However, there’s a catch. Frank Stronach, the chairman of Magna, has stated that his company’s ?agreement with General Motors does prevent us from selling Opel in the United States.? So the proposed sale is likely to include a clause that the company purchasing Opel could not sell Opels in the United States (and China) or set up U.S. factories for at least some period of time.

The formal legal name for this type of behavior is a ?horizontal restraint of trade.? It’s considered a serious violation of the antitrust laws, given its strong anticonsumer effects. If market participants divide the markets among themselves, competition falls, and prices rise. That hurts consumers ? for instance, Americans who might want to buy an Opel from Magna instead of a car from the ?new? (and still shaky) GM. But GM and its dealers would welcome this forced limit on choice.

Some say that the strong Euro and weak dollar make European cars in general more expensive to Americans and that no one is currently interested in importing Opels into the United States. Even if all that were true, that doesn’t answer the point.

Actually, cars based on Opel technology would likely be popular in the United States. Opels were sold here from 1958 to 1975, with some success. More recently, from 1997 to 2001, the Cadillac Catera sedan was sold in the United States as a repackaged version of the Opel Omega MV6, made in Russelsheim, Germany. During its five-year production run, more than 95,000 American consumers purchased Cateras ? not bad for a car steering toward the high end of the market.

This experience shows that Opels can be made in Europe and sold in the North American market. Ford is using its European brands to reinvent its North American line, and there’s no reason GM could not take this approach. But having decided to sell Opel, they apparently want to make sure that no one else can compete against them in this way.

Finally, Saturn ? another GM line now being sold ? has used Opel models quite extensively. The Saturn Vue is a rebadged Opel Antara; the Saturn Sky is an Opel GT; and the Saturn Astra is an Opel Astra (they didn’t even bother changing the name). As part of the sale of Saturn, Saturn will buy GM brands exclusively for the next two to three years. So you can see why GM didn’t want the competition.

And if Opel’s ?green? technology is the primary attraction to prospective purchasers, then one would think the Obama administration would seize on this and want those cars to be sold here. Yet that would offend the United Auto Workers, who now have a significant ownership stake in the new GM company. They wouldn’t want the competition.

So the provision would save GM from more competition, prevent Saturn from buying Opel cars it has marketed in the past under a different label, and prevent companies such as Magna from turning into a branded competitor that can threaten the Big Three. It’s all very convenient ? for everyone except the automotive consumer, the person whom antitrust laws are supposed to help.

Two wrongs don’t make a right. Now, the wrong of the auto bailout that led to GM’s forced bankruptcy has been compounded with a proposal to harm consumers through a blatantly anticompetitive provision that would deprive American consumers of the right to buy a car of their choice. GM ? which really means the Obama administration ? and Germany should do the right thing and take a stand in favor of free trade and consumer choice.

C. Boyden Gray is a former U.S. ambassador to the European Union.

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